2. “Are these vehicles made in the U.S. or overseas? Toyota Camry and Toyota Tundra Honda Accord and Honda Odyssey Minivan BMW Z4 Roadster & BMWX5 SUV Mercedes-Benz-M-Class Toyota Corolla Subaru Legacy Nissan Maxima Hyundai Sonata and Elantra Chrysler Crossfire Dodge Ram Plymouth voyager Chrysler PT Cruiser Ford Jaguar Pontiac Firebird Chevrolet Lumina Mercury Capri Chrysler Crossfire Chrysler 300 Buy American? Chrysler Firepower Chrysler 300

3. Are You Really Buying American? Toyota Camry and Tundra – U.S.A. (California and Texas) Honda Accord and Honda Odyssey Minivan – U.S.A. (Ohio) BMWX4 Roadster and BMWX5 SUV – U.S.A. (South Carolina) Mercedes-Benz-M-Class – U.S.A. (Alabama) Toyota Corolla – U.S.A. (California) Subaru Legacy – U.S.A. (Indiana) Nissan Maxima – U.S.A. (Tennessee) Hyundai Sonata & Elantra – U.S.A. (Alabama) Dodge Ram – MexicoPontiac Firebird - Canada Plymouth Voyager – CanadaChevy Lumina & Impala - Canada Chrysler PT Cruiser – MexicoMercury Capri - Australia Ford Jaguar – EnglandChrysler Crossfire – Germany Chrysler 300 - Canada foreign nameplatesU.S.A. All the above cars with foreign nameplates are made in the U.S.A.; those with domestic nameplatesoverseas domestic nameplates are made overseas. This competition gives U.S. consumers higher quality, more choices, and lower Chrysler prices. Globalization has blurred national auto identities. Chrysler was acquired Daimler BenzDaimler BenzMercedes SUVs by Daimler Benz. Daimler Benz builds Mercedes SUVs in Vance Alabama & owns Mitsubishi10% of Hyundai MotorGMSaab a controlling stake in Mitsubishi and 10% of Hyundai Motor. GM owns Saab and stakes in Isuzu, Suzuki, Subaru, Fiat & DaewooFordMazda, Volvo, has stakes in Isuzu, Suzuki, Subaru, Fiat & Daewoo. Ford owns Mazda, Volvo, Jaguar, Land Rover, & Aston Martin Jaguar, Land Rover, & Aston Martin. Chrysler 300 Concept car

4. A ll- W orld C ar [parts from 15 countries] Switzerland may get the inputs to make the speedometer and gears from several countries. Ford Escort

5. Japan – “Land of the $30 pizzas, $30 lipstick, $50 melons, $100 jeans and $4,500 two-bedroom apts.” Japan has been a closed economy[fewer choices, higher prices Japan has been a closed economy[fewer choices, higher prices] ItemN.Y.Tokyo $228$605 Shock Absorbers$228 $605 $120$600 Alternator$120 $600 $5$50 Watermelon $5 $50 $1$7 Cup of coffee $1 $7 $20$200 Cab to airport $20 $200.37.79 Stamp.37.79 $1.85$5.00 Gallon of gasoline $1.85 $5.00.50$1.00 Newspaper.50 $1.00 $14$20 Movie Ticket $14 $20 550 cars per 1,000240 per 1000 We have 550 cars per 1,000; Japan has only 240 per 1000 inhabitants. Japanese cameras aremore expensive in Tokyo Japanese cameras are more expensive in Tokyo than in New York. In Tokyo, you have to have a sizable inheritance to be able to afford a house. $31,000 per capita$24,500 in the U.S. Their national debt is $31,000 per capita, compared to $24,500 in the U.S. decade-long economic tailspin in. rates of.15 of 1%. J apan has had a decade-long economic tailspin, even with in. rates of.15 of 1%. The Japanese paid $28 billion per year in higher prices for rice because they would not buy from U.S. rice farmers. Japanese consumers pay $600,000 in higher prices for each job protected.

7. JUST BECAUSE YOU CAN PRODUCE IT, DOESN’T ALWAYS MEAN YOU SHOULD!!!!

9. Cleaning lady can clean house in 7 hours I can clean house in 5 hours.

10. http://www.youtube.com/watch? v=38hvvAzgXZY

11. Comparative Advantage A nation should specialize in producing goods in which it has a comparative advantage: ability to produce the good at a lower opportunity cost. Example: CheeseWine Spain:2 pounds2 Cases France2 pounds6 Cases :

12. Who should produce cheese, who should produce wine?

13. USA Caviar- 6 Wheat 3 Russia Caviar 16 Wheat 4

14. Exchange Rates

15. $1 will buy EXCHANGE RATES:.63 British pounds 10.91 Mexican pesos.93 European euros 119 Japanese yen 1,237 South Korean won 47.68 Indian rupee 1.48 Canadian dollars 1.36 Swiss francs 8.54 Swedish krona GLOBAL PERSPECTIVE Foreign Currency per U.S. Dollar

16. 15 Types of Exchange Rate Systems Fixed Exchange-Rate Systems A currency system in which governments try to keep the values of their currencies constant against one another is called a fixed exchange- rate system. Flexible Exchange-Rate Systems Flexible exchange-rate systems allow the exchange rate to be determined by supply and demand.

17. Currency Terms AppreciationAppreciation: Currency is increasing in demand (stronger dollar) –U.S. Currency will appreciate when more foreigners: travel to the U.S., buy more U.S. goods or services, or buy the U.S. dollar to invest in bonds

18. Currency Terms  Depreciation  Depreciation: Currency is decreasing in demand (weaker dollar) Being SUPPLIED in exchange for other currency.  U.S. Currency will depreciate when fewer foreigners: travel to the U.S., buy fewer U.S. goods or services, or sell the U.S. dollar to invest in their own bonds

19. Dollar Price of Yen $.01 Quantity of yen SySySySy DyDyDyDy The equilibrium rate is the rate at which currency of one nation can be exchanged for the currency of another nation. Q e (1) At this rate, $1 will buy 100

20. AS AD2 AD 1 Y R Y * U.S. Economy What might cause this exchange rate to change? Suppose incomes rise in the U.S. due to an economic boom. Consumers will be willing and able to buy more U.S. and Japanese goods.

21. Quantity of Quantity of DyDyDyDy SySySySy $.05 $.01 D y2 D Price of Price of An increase in U.S. demand for Japanese goods will increase the demand for yen and raise the dollar price for yen (how much each yen cost).

22. Quantity of A Quantity of A D1D1D1D1 S $.05 $.01 D2D2D2D2 D Price of Price of When the dollar price of yen increases, we say that the dollar has depreciated (it takes more dollars to buy a single yen). Thus the international value of the dollar has declined.

23. AS AD1 AD2 Y R Y * Japanese Economy Since the value of the yen has increased, the price of Japanese goods will become more expensive to Americans. The result will be that American consumers will buy less Japanese goods and more American goods. This will cause a recessionary trend in the Japanese economy.

24. Quantity of Quantity of DyDyDyDy SySySySy $.01 $. 005 D y2 A Price of Price of A decrease in the dollar price of yen is called appreciation of the dollar. The international value of the dollar has increased. Since it takes fewer dollars to buy a yen the price of Japanese goods become cheaper to Americans.

25. Malaysia’s price level is decreasing faster than that of Brazil 4. If Malaysia’s price level is decreasing faster than that of Brazil, Malaysian ringgitMalaysia’s exports the Malaysian ringgit will (apprec/deprec) & Malaysia’s exports to Brazil to Brazil will (increase/decrease). growth rate is less rapid in Djibouti 5. If growth rate is less rapid in Djibouti than in Swaiziland, Djibouti bouti then the Djibouti bouti will (appreciate/depreciate) and Djibouti’s exports Djibouti’s exports will (increase/decrease). Euro price of the S. Korean won decreasesEuro 6. If the Euro price of the S. Korean won decreases, the Euro has European exports to Korea (apprec/deprec) & European exports to Korea will (incr/decr). interest rates are increasing faster in Zambia 7. If interest rates are increasing faster in Zambia than in Spain, Zambian KwachiZambia’s the Zambian Kwachi will (appreciate /depreciate) and Zambia’s imports from Spain imports from Spain will (increase/decrease). Appreciation/Depreciation Practice Quiz 1 more Thai bahts are required to buy a dollar 1. If more Thai bahts are required to buy a dollar, baht then the baht has (appreciated/depreciated), & Thai exports to the U.S. Thai exports to the U.S. should (increase/decrease). Latvia’s demand for U.S. Fuzzy W uzzies decrease 2. If Latvia’s demand for U.S. Fuzzy W uzzies decrease, Latvia’s then Latvia’s Lat will (apprec/deprec) & Latvia’s imports from the U.S. imports from the U.S. will (increase/decrease). interest rates are decreasing faster in S.Korea[4 % ] 3. If interest rates are decreasing faster in S.Korea[4 % ] Korean won than in Cuba[8 % ], then the Korean won will (appr/depr) Korea’s exports to Cuba & Korea’s exports to Cuba will (increase/decrease).