A Macroeconomic Perspective of the Economy essay

Another factor that ties in is outsourcing, which is nothing new and as been going on for years in order for companies to turn more of a profit for their product by getting the production portion of the process done overseas at a fraction of the cost. Wealthier countries are able to do this because their currency is worth more on a conversion scale. If we analyze the Mexican peso to the United States dollar for a period of five years we can observe the ups and downs of the economy, what factors attribute to them, and why each currency is worth how much it is worth on the exchange rate scale.

When the U. S. Dollar was introduced on April 2, 1792, it was based on the peso with the exchange rate of 1 dollar to 1 peso” (I’M/hat is the Mexican peso? , n. D. ). Since that time the exchange rate of Mexican peso to united States dollar has changed considerably. Due to supply and demand of products produced by either country the exchange will rise and fall. Consequently products produced by either country result in a higher or lower demand for that product resulting in the amount that the currency is worth in that country when exchanged for another countries currency.

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For example, if Mexico produced a product that was in high demand in the united States the Mexican Peso’s exchange rate would rise and the United States dollar would fall because it would take more dollars to equal 1 peso. If we were to look at a 5-year period ending in 2010 we can provide an analysis comparing the Mexican Peso to the united States Dollar. “Starting January 2005, 1 United States dollar equaled 0. 088883 in Mexican peso’s, if we skip ahead 5 years to December 2010, 1 United States Dollar equaled 0. 7834 in Mexican Peso’s”(“Exchange Rate Average, “n. D Going back to the previous example of supply and demand is one cause for this exchange rate to change. If the United States were to buy goods from Mexico then the United State’s Dollar would depreciate in value and the Mexican Peso’s value would go up resulting in more dollars’ to purchase Mexican goods. Consequently the Ignited State’s would purchase from another country or produce the goods themselves in order to spend less on the same goods.

Therefore if the United State’s can produce goods that are in emend from other countries, we not only become more self-reliant but the value of the dollar goes up. “In recent times the peso has remained more or less steady against the US dollar and other major international currencies”(“History of the Mexican Peso”, n. D. ). Overall the Mexican Peso is a strong contender when comparing to the United States dollar, not as strong but in the running as far as comparison. Just like any other currency out in the world the Mexican Peso was affected by international factors as well as domestic factors.

Mexico can’t produce certain products that other countries can or certain international events took place example war, which caused the value of the Mexican Peso to go down. Although poverty and underemployment is high throughout the country, changes are being implemented through free trade with other countries to remedy the is. As countries are starting to become stronger and more developed, exchange traded funds are starting to arise. An exchange-traded fund is “a security that tracks an index, a commodity or a basket of assets like an index fund, but reads like a stock on an exchange”(“Definition Investigated,” n. . ). When we look at Mexico one of their exchange traded-fund is the EWE. This fund covers Mexican companies for example Walter De Mexico. The ups and downs of the different business result in the ups and downs of the “stock” in exchange traded funds. However regardless of whether the fund is doing well or not, you as the investor have the option to sell, buy, or purchase just one share. In conclusion, the world of finance is constantly growing and evolving.

Since the beginning of the Mexican peso and United States dollar there has been a relationship between the 2 that has grown and fallen based on each countries action. The value is based on emerging markets and international trading among each other resulting in the rise and fall of each other. As countries develop exchange-traded funds begin to grow as the country does. However unlike the option to buy or sell resulting in the rise and fall of price in exchange traded funds the value of currency is out of the hands of any one individual person or country for that matter.