Week 14 — Open-Economy Macro: Exchange Rates & the Balance of Payments
Why this matters
A farm family selling grain overseas and a hotel worker hoping visitors fill the rooms both feel the price of the dollar.
In plain language
This week is about the price of money itself. Before you can buy something made in another country, someone has to swap dollars for that country's currency. The swap happens at an exchange rate (the price of one currency in another). When that price moves, everything that crosses a border gets cheaper or dearer, so a "strong dollar" helps some people and squeezes others. You will also meet the balance of payments (a country's record of everything it buys from and sells to the rest of the world), and learn why its two halves always add to zero.
- Already covered: Week 13 showed why countries trade and how to read the trade balance.
- This week: exchange rates, the price chain to net exports, and the balance of payments.
- How they connect: last week's exports and imports now carry a price in two currencies.
- Where we're going next: Week 15, Macroeconomic Schools & Policy Debates.
Focus
What does a stronger dollar do to exports, imports, and a country's books?
By the end of this module, you should be able to:
- [ ] tell an appreciation from a depreciation
- [ ] convert prices between dollars and a foreign currency
- [ ] trace the price chain to net exports and aggregate demand
- [ ] show the two accounts sum to zero
To-do
Plan your week
- Read Chapter 14 (45 minutes), then the lecture and slides.
- Work the tutorial (60–90 minutes) and practice set (20 minutes).
- Do the Model Workshop (90 minutes), discussion, and assignment.
- Take the quiz.
This week's checkpoint: the dollar goes from 100 to 120 yen. Price the car and the machine.
You've got this
Ask how much one dollar buys, and ask your instructor early.
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