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Macro 21.pdf
- 4. Quiz Master
- 6. The 4 Cases for Trade Theoretical Case Moral Case Political Case Empirical Case
- 7. Theoretical Case Trade and Specialization Adam Smith Comparative Advantage David Ricardo
- 8. Moral Case Natural Rights Human Freedom to create value relationships
- 10. Empirical Case Evidence and Experience Support
- 11. The 14 Arguments for Protection
- 12. 1 National Defense 2 Infant Industries 3 Debt 4 Jobs 5 Subsidy 6 Environmental Standards 7 Labor Standards 8 Negotiating Strategy 9 Retaliation 10 Dumping 11 Culture 12 Self-Reliance Independence 13 Tari ff Tax Revenue 14 Supply Chain Arguments for Protectionism
- 13. National Defense
- 19. Retaliation
- 20. Foreigner is dumping at below cost
- 21. Culture
- 24. Supply Chain
- 27. one unit of this will buy ___ units of that
- 29. Why buy Dollars? Buy American Stuff Invest in America Trade for other currencies Hold and Hope
- 30. Demand Dollars Yuan Per Dollar Supply Higher U.S. Interest Rate 6.44 6.50 Depreciating Cost more to buy a dollar Losing Value
- 31. Demand Dollars Yuan Per Dollar Supply Lower U.S. Interest Rate 6.44 6.25 Appreciating Cost Less to buy a Dollar Gaining Value
- 32. Big Mac Index
- 33. Big Mac Index Country Currency Price Rate Dollars Phillipines Peso 140 0.019 $2.66 Vietnam Dong 65,000 0.000043 $2.80 China Yuan 20.50 0.15 $3.08 Saudi Arabia Riyal 12 0.265 $3.18 Switzerland Franc 6.5 1.0 $6.50
- 34. Arbitrage Buy low and sell high Buy here and sell there Buy today and sell tomorrow
- 35. Arbitrage Are the price differences different than the exchange rate? If so, buy low and sell high
- 36. The Law of One Price Arbitrage closes price gaps Bid up the low price - Demand Bid down the high price - Supply
- 37. 1.00 Dollar to 6.92 Yuan USD to CNY $ to ¥ $ 5.00 x 6.92 = ¥ 34.60 ¥ 30.00 ÷ 6.92 = $ 4.34
- 38. $ 5.00 $ 4.34 increase demand increase supply $ 4.67 one price Price Arbitrage Arbitragers
- 39. Arbitraging 1. Pick a product and review the prices in both countries 2. Are the prices different than the exchange rates? 3. Buy currency in the low priced country 4. Buy the product in the low priced country 5. Move to the high priced country 6. Sell in the high priced country
- 41. 1.00 Dollar to 51.91 Peso USD to PHP $ to ₱ $ 50.00 x 51.91 = ₱ 2,595 ₱ 1,973 ÷ 51.91 = $ 38.00
- 42. $38 $40 $40 Supply More Supply Demand More Demand Price Quantity Price Quantity Demand Supply $50 ₱ 1,973
- 43. Cost? Arbitraging 1. Traded $38 for ₱ 1,973 2. Bought shoes for ₱ 1,973 3. Shipped to U.S. 4. Sold in U.S. for $50 5. Traded $38 for $50 6. Made $12 on $38 7. Made 31 percent profit 8. Repeat
- 44. 1. Dollar to Won (KRW) rate is 1 to 1,176 2. Cell Phone in U.S. is $600 3. Same Cell Phone in South Korea is 600,000 4. Cost to ship is $5 5. What should you do and how much will you make? Dollars and percent?