So far this semester we’ve talked a lot about economics in terms of a single country. However, the economies of other countries have an effect on our economy, as well. One way this is obvious is by looking at exchange rates. An exchange rate tells you how much one country’s currency is worth in terms of another country’s currency. The value of a country’s currency is determined by the health of the economy; the stronger a country’s economy, the more value their currency has. To get more details about what factors affect exchange rates, check out this article from Investopedia. There are many websites you can use to check exchange rates. One resource is OANDA.
In addition to affecting your travel plans, exchange rates also affect international trade. If you travel to Germany, you’ll probably have a hard time using US dollars to buy anything. You have to exchange your money for Euros, the currency in Germany. You are essentially buying those Euros. When the US currency is strong, foreign businesses have to buy more of our dollars in order to purchase our products. This can cause demand for our products to fall (for more on supply and demand, check out the blog post from a few weeks ago). However, because our currency is strong we can buy more of other countries’ currencies to purchase their products. Over time, we drive up the cost of other currencies and ours falls. Exchange rates and trade are constantly impacting each other. For more information, check out this article from Econ Ed Link.
International trade is good for our economy (and for you!) because it increases competition and keeps prices low for consumers. Some individuals argue that the best type of international trade is fair trade. You can learn more about this type of trade by checking out some of the books below.
- Fair Trade for All: How Trade Can Promote Development, by Joseph E. Stiglitz and Andrew Charlton. Call number: HF1413 .S85 2005, Main Collection (3rd floor)
- Fair Trade: Market-driven Ethical Consumption, by Alex Nicholls and Charlotte Opal. Available online
- Human Rights and the Ethics of Globalization, by Daniel E. Lee, Elizabeth J. Lee. Call number: JC571 .L373 2010, Main Collection (3rd floor)