ECON 2610 Lecture 10: Week 10 Notes

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Having someone outside paid to provide services. Pays by depositing in the asian firm"s account in san fran. Current account transaction: importation of goods, more mahogany than we used to. Payments: foreign claims in us, us liabilities to foreigners go up . Problem: so connected there is no inflation. Good or bad: eliminates policy discretion, guards against incompetent gov"ts, don"t allow stupid decisions to screw others over because it is there own economy too. Good: guard against policy decisions that can have detrimental effects/instability throughout the entire market, forces to follow certain policies. Terms currency being bought in terms of this. American terms base is foreign, not the $ European terms base is the : example: euro-dollar quote of . 2120. When we say the exchange rate increases, the base currency appreciates. When we say the exchange rate decreases, the base currency depreciates. Yen/us dollar: = $ per yen, can be a / , : ; > , any symbol.

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