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Exchange rate is a fickle thing
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관리자
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2016-08-22

Exchange rate is a fickle thing
김경민 1402
Because of the devaluation of the Chinese Yuan a while ago, the economical importance of currency and exchange rate was spotlighted. Knowing what they are and being able to predict the basic ramifications of economical changes is essential.
 
The term “exchange rate” refers to the value of a currency when it is exchanged into another currency. If 1157 won is exchanged into a dollar, the price of a dollar in terms of won is 1157 won.
 
International currency takes dips and turns every day, affecting the economy in unpredictable ways. For instance, let’s say that you are exporting pens to America. Every time you sell a pen, you get 1 US dollar, which is worth 1100 won. One day, let’s say that the Korean exchange rate into USD went up to 1200 won. The price of the pen is the same; 1 US dollar. However, you can get 1200 won when you exchange the dollar into Korean won. Like this, the rise in exchange rates can increase export sales.
 
The price of goods also goes up as exchange rate increases. This time, let’s think that we are importing the pens above. We are paying a dollar for a pen, and are using 1100 won every time we buy a pen. If the exchange rate increases to 1200 won, we would have to pay 1200 won per pen. Like this, the price of goods goes up with the exchange rates.
 
Exchange rates can even effect economical growth. If the exchange rate goes up and export sales increase, we can expect more production to match the new sales demand. This results in stimulation of economical growth and rise in employment rate.
 
Like this, the everyday changes in exchange rate can affect our lives in many ways. Obtaining basic facts about the financial world is vital in the modern world.
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