Economics Assignment Example | Topics and Well Written Essays - 500 words

Economics - Assignment ExampleHowever, these appreciations were very minimal, but the depreciation against the Peso was substantial. Part (d) On a broader scale, depreciation in the US Dollar get out put one over its exports appear cheaper as the dry land trading with the USA can get more dollars for their respective currency in 2003 as compared to 2002. On the split side, the USA importers will have to pay more dollars to obtain the required Foreign commutation for their imports, and hence imports will become more costly. In a nut shell, the exports will get a boost and the imports will be hindered by a depreciating US Dollar. However, if we look on an item-by-item scale, the Yen, Yuan and Canadian dollar all depreciated against the US Dollar, and hence USAs export to these countries office marginally reduce and imports may marginally rise. In Mexicos case, exports will strongly boost and imports will decline. Problem 2 Part (a) There are two ways an investor can take value o f this arbitrage. In the first alternative, he can buy Euros in the New York FX Market at a rate of $1.25/Euro and then sell these Euros in the Tokyo FX Market at a rate of $1.27/Euro to make a clean spread of 2 cents on each Euro he sells.