Other Economics – Exchange Rate and Trade Barriers (B_S2M4)

This module provides experience in research and application for understanding and addressing trade issues including: exchange rate; interest rates; trade barriers; tariffs and taxation.

Currency Exchange
An exchange rate is a rate at which one currency can be exchanged for another. In other words, it is the value of another country's currency compared to that of your own. If you are traveling to another country, you need to "buy" the local currency. Just like the price of any asset, the exchange rate is the price at which you can buy that currency.

Fixed Exchange Rate
There are two ways the price of a currency can be determined against another. A fixed, or pegged, rate is a rate the government (central bank) sets and maintains as the official exchange rate. A set price will be determined against a major world currency (usually the U.S. dollar, but also other major currencies such as the euro, the yen or a basket of currencies). In order to maintain the local exchange rate, the central bank buys and sells its own currency on the foreign exchange market in return for the currency to which it is pegged.

Floating Exchange Rate
Unlike the fixed-rate, a floating exchange rate is determined by the private market through supply and demand. A floating rate is often termed "self-correcting," as any differences in supply and demand will automatically be corrected in the market. Look at this simplified model: if demand for a currency is low, its value will decrease, thus making imported goods more expensive and stimulating demand for local goods and services. This in turn will generate more jobs, causing an auto-correction in the market. A floating exchange rate is constantly changing.

Upon the completion of this module, users will be able to:
•Research and apply theoretical and practical knowledge of international economics in investigating the issues and crises related to organisations and countries develop appropriate economic solutions and policies.

TIME: Up to 2 Hours

• No prerequisites.
• No materials distributed.
• No formal assessments required.
  • S2. Economics - Lecture 4 - Exchange Rate and Trade Barriers
  • S2. Economics - Course Linkage Map
  • S2. Economics - Course Linkage Table
Completion rules
  • All units must be completed
  • Leads to a certification with a duration: Forever