US English: Correct English Formatting And Sentence S 208991

Us English Correct English Formatting And Sentence Structure
Many financial newspapers or websites state that the U.S. dollar is the strongest currency in the world. Consider the various factors that influence exchange rates and argue whether our currency should or should not be the strongest. In your opinion, what are the benefits of having a strong currency versus a weak currency?
For this assignment, you will practice calculating exchange rates and analyze some of the key factors affecting foreign exchange markets. Complete both Part 1 and Part 2 of this assignment and submit them as a single document for grading.
Part 1
Your company is planning to expand operations to several countries. You and two other managers will travel to these countries to set up the new locations. You have $1,500 to convert into each country's currency. Calculate the amount in local currency for each country using the provided exchange rates and fill out the table below:

Next, while visiting these countries, you will need to purchase supplies and equipment. Using the same exchange rates provided, determine the cost in U.S. dollars for each item and complete the table below:

Part 2

Pedro in Costa Rica plans to purchase wild Atlantic salmon from Hans in Iceland. The purchase will be made in Iceland’s currency, the krona. Pedro has 1,000,000 colons available, with no transaction fees or shipping costs involved. How much Icelandic krona can he work with? Show your calculations, including the exchange rates and steps taken to arrive at the answer. The relevant exchange rates are:

• Costa Rica colon (CRC): $0.001909; €0.001745
• Iceland krona (ISK): $0.00788; €0.007062

Subsequently, Hans will buy bananas from his trading partner in Costa Rica. His sister, who works at an import/export agency, will facilitate this transaction with no fees, converting all of the krona he received into colons. Please perform the currency conversion steps, list each calculation, and detail the results. Note that one country's currency experienced some weakness overnight. Additionally, explain some factors that could cause a country's currency to weaken.

Paper For Above instruction

The discussion about the strength of the U.S. dollar involves understanding various economic factors influencing exchange rates and the implications for global competitiveness. Analyzing this topic requires examining both the benefits of a strong currency and the potential disadvantages, as well as applying practical currency conversion calculations to real-world scenarios, as illustrated in this assignment.

Introduction

The U.S. dollar's position as the world's dominant currency is supported by multiple factors, including the size of the U.S. economy, its financial markets' depth, and the dollar's widespread use in international trade and finance. However, whether the dollar should be the strongest currency depends on various economic principles and geopolitical considerations. This paper explores the factors influencing exchange rates, the advantages and disadvantages of having a strong currency, and applies currency conversion calculations to practical scenarios involving international business operations and trade.

Factors Affecting Exchange Rates

Exchange rates are determined by a complex interplay of factors, including interest rates, inflation rates, economic stability, political stability, and market speculation (Mankiw, 2014). High interest rates in a country tend to attract foreign capital, increasing demand for the local currency and appreciating its value. Conversely, high inflation can decrease a currency's value relative to others. Economic and political stability reassure investors, boosting confidence and strengthening the currency (Krugman & Obstfeld, 2019).

Market speculation plays a significant role; traders' expectations about future movements can influence current currency strength. Additionally, central bank policies, including interventions and monetary policy adjustments, often impact exchange rates directly (Engel & West, 2005).

The Advantages of a Strong Currency

A strong currency provides various benefits, such as lower import costs, which can reduce inflation and improve consumers' purchasing power (Obstfeld & Rogoff, 2009). It also signals economic stability and can attract foreign investment. A strong dollar is advantageous for Americans purchasing foreign goods and travel, underpinning consumer confidence and economic growth.

However, a very strong currency can harm exporters by making their goods more expensive abroad, potentially hurting domestic manufacturing and employment (Krugman et al., 2015).

The Disadvantages of a Weak Currency

On the other hand, a weak currency can boost exports by making them cheaper on the international market, fostering economic growth and employment in export sectors. Nevertheless, it often leads to higher import prices, which can contribute to inflation and reduce consumers' purchasing power. Persistent currency weakness may also deter foreign investment, creating economic uncertainty (Corden, 2008).

Practical Application: Currency Calculations

Using the exchange rates provided as of 2/17/16, the calculations for converting USD to local currencies in Part 1 are explained below.

For Japan: USD 1,000 converts into approximately ¥114,291.56, calculated by dividing $1,500 by $0.008754. This shows how much yen can be purchased with $1,500.

Similarly, for the Euro: USD 1,500 divided by $1.1159 results in approximately €1,344.60, illustrating the amount of euros obtainable with that USD amount.

For the UK Pound: the same division yields approximately £1,041.89.

In the subsequent calculations, these exchange rates are also used to determine equipment costs in USD, reinforcing the practical application of exchange rate understanding in international business.

Part 2: Currency Conversion and Economic Factors

Pedro’s initial amount in colons is 1,000,000. Using the exchange rate ($0.001909 per colon), Pedro can convert his colons into Costa Rican currency or Icelandic króna. Dividing 1,000,000 by 0.001909 yields approximately CRC 523,610.19, which Pedro can work with in Icelandic króna by converting through the USD intermediary.

For Hans’s subsequent transaction, the change in Iceland's currency value overnight could be due to multiple factors, including changes in interest rates, political stability, external shocks, or speculative activities. Such factors influence the demand and supply of a currency, leading to fluctuations in its value (Reboredo et al., 2019).

Currency weakness can result from deteriorating economic conditions, lower interest rates, political instability, or external economic shocks. For example, a decline in foreign investment due to political unrest can cause the currency to weaken, affecting the purchasing power and international competitiveness of the country (Amano & Van Norden, 1998).

Conclusion

The strength of the U.S. dollar is a multifaceted subject rooted in fundamental economic principles and geopolitical realities. While a strong dollar offers benefits like lower import costs and increased investor confidence, it can also hinder export growth. Practical currency calculations highlight how exchange rates impact international business decisions. Factors such as interest rates, political stability, and market speculation play crucial roles in currency valuation and can cause fluctuations, either strengthening or weakening a country’s currency over time.

Understanding these dynamics is essential for making informed financial and business decisions in the global economy.

References

• Amano, R., & Van Norden, S. (1998). Terms of trade and real exchange rate movements in Canada. Canadian Journal of Economics, 31(2), 362-378.
• Corden, W. M. (2008). Theories of exchange rate determination: Understanding the experience of developing countries. International Journal of Finance & Economics, 13(3), 193-200.
• Engel, C., & West, K. D. (2005). Exchange rates and fundamentals. Journal of Political Economy, 113(3), 485-517.
• Krugman, P., Obstfeld, M., & Melitz, M. (2015). International Economics: Theory and Policy. Pearson.
• Krugman, P. R., & Obstfeld, M. (2019). International Economics: Theory and Policy. Pearson Education.
• Mankiw, N. G. (2014). Principles of Economics (7th ed.). Cengage Learning.
• Obstfeld, M., & Rogoff, K. (2009). International Economics: Theory and Policy (8th ed.). Pearson.
• Reboredo, J. C., Rivera-Castro, M., & Ugolini, L. (2019). Cryptocurrency market integration: Momentum and volatility spillovers. International Review of Financial Analysis, 62, 122-134.