Analyzing Foreign Exchange and Investment in United States & China Discussion

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Economics 1 : Final Project - Analyzing Foreign Exchange and Investment Lesson 6 Overview It’s time to apply what you’ve learned in this course about macroeconomics and how each nation’s economy affects others. To complete this project, you’ll need to research a foreign currency that you find interesting. You'll then perform a macroeconomic analysis of the currency and write a paper that summarizes your conclusions. 6.1 Analyze foreign exchange and investment and the effects each nation’s economy has on another nation’s economy Graded Project: Analyzing Foreign Exchange and Investment READING ASSIGNMENT SUBMITTING YOUR PROJECT © 2020 Penn Foster Inc. Economics 1 (v3) : Lesson 6 : Page 1 Your project must be submitted as a Word document (.docx, .doc)*. Your project will be individually graded by your instructor and therefore may take up to five to seven days to grade. Be sure that each of your files contains the following information: Your name Your student ID number The exam number Your email address To submit your graded project, follow these steps: Log in to your student portal. Click on Take Exam next to the lesson you’re working on. Find the exam number for your project at the top of the Project Upload page. Follow the instructions provided to complete your exam. Be sure to keep a backup copy of any files you submit to the school! Introduction Every country has its own currency. The value of a country’s currency is directly related to its economics. Therefore, the value of each country’s currency is different. The question becomes, “How can countries and businesses do business with each other when the value of each country’s currency is different?” The answer is The Currency Exchange Rate. With the advent of the Internet, there has been an explosion in the Forex Market to the point where this market dwarves all other markets. The Forex Market (FX for short) is where currencies are bought and sold © 2020 Penn Foster Inc. Economics 1 (v3) : Lesson 6 : Page 2 and a price is “fixed” on a moment-by-moment basis between the values of different currencies. This is known as the “currency exchange rate." For example, as of this writing, $1 U.S. will get you $1.31 Canadian. This difference in the exchange rate means that the U.S. Dollar (the U.S. economy) is stronger than the Canadian Dollar (the Canadian economy) because for each U.S. Dollar, you get more Canadian Dollars. Conversely, for $1 U.S., you'll only get $0.80 Sterling or British Pound. The U.S. economy is weaker than England’s economy because for each U.S. Dollar, you get less British Pounds. Project Instructions Choose one country from the following list: Japan UK (United Kingdom – England – Great Britain) Australia Canada South Korea This final project will require you to examine the FX currency of your choice from the list above versus the U.S. Dollar over any recent consecutive five-year period as to why the exchange rate fluctuated during that period. Writing Guidelines © 2020 Penn Foster Inc. Economics 1 (v3) : Lesson 6 : Page 3 Use the following writing guidelines to complete and submit your paper: Using Microsoft Word or a Word-compatible program, include the following information at the top of the paper: Your Name Student ID Number Course Title and Number Graded Project Number (the six-digit number found on your student portal) The paper will contain three parts: An Introduction The Main Body A Summary or Conclusion Your paper must be a minimum of five pages in length, including a Works Cited page. The submission will be double-spaced, in a standard print font of size 12. Use a standard document format with 1-inch margins. Do not use any fancy or cursive fonts. Be sure to use correct grammar, punctuation, and spelling. Use the tools available in Word or other software programs such as Grammarly to check and correct the English Composition. Citing Your Work: A minimum of five citations is required. When it comes to citing source material that isn't your own, there are two parts to a citation. The first one is the in-text © 2020 Penn Foster Inc. Economics 1 (v3) : Lesson 6 : Page 4 citation and the second one is the citation presented on the Works Cited page itself. Improperly formatted citations, or missing either of the two parts of citations, constitutes Plagiarism and results in a failing grade of 1. The citations must follow APA formatting. If you don't remember how to make a properly formatted APA citation, go to the Purdue OWL (Online Writing Lab) website by following these steps: Do a search on the Internet for “Purdue OWL” and go to the homepage. In the menu on the left, click on Research and Citation. From the drop-down menu, click on APA Style. Click on APA Formatting and Style Guide. Select Reference List: Electronic Resources. Alternatively, go to Penn Foster’s Writer’s Block (pflibrary.pennfoster.ed u/writersblockhomepage) , or call and speak with an English instructor to refresh your memory on how to make a proper citation. Writing Steps To write your paper, follow these suggested steps: Step 1 Select a foreign currency you want to analyze versus the U. S. Dollar. Find the FX ticker symbol for the currency. © 2020 Penn Foster Inc. Economics 1 (v3) : Lesson 6 : Page 5 Step 2 Perform your research. Go to a website such as www.xe.com (www.xe.c om/currencycharts/?from=USD&to=EUR&view=1D) or Bloomberg that has charting capabilities for the currency selected versus the US Dollar. Even a search in Google for the name of the currency exchange rate (such as searching “China currency exchange rate”) can be done to view a chart. Decide on a five-year period that you'll want to analyze. Record the currency exchange rate over the five years showing the “significant” points in time such as: The starting point for the five-year period The high points The low points Any “relatively” major ups and downs in the exchange rate The ending point for the five-year period Be sure to save the web address, as it will be used as one of the citations required later on in your Works Cited page. Step 3 Once you have the exchange rates for the five-year period, research to formulate an opinion as to why the exchange rate fluctuated over that period. Using your knowledge of Macroeconomics, research the economics of © 2020 Penn Foster Inc. Economics 1 (v3) : Lesson 6 : Page 6 the country selected (such as GDP figures, supply/demand, housing, and labor, just to name a few of the economic concepts that you've learned about) and the events (such as political events, natural or unnatural disaster events, war events) that had an effect on the economy of the country. Do the same research for the economics of the United States during that five-year period. Step 4 Write a first draft of your paper following the guidelines presented above. The introduction should include what the paper is about, the currency selected, and a table listing the currency exchange rates as of specific dates for the country selected versus the U.S. dollar. This table should have an in-text citation and a properly formatted citation on the Works Cited page so that these figures can be verified based upon the citation presented. Work, facts, figures, and any other elements that aren't your own must be properly cited; otherwise, this is plagiarism and will warrant a grade of 1. This introduction should be one or two paragraphs at most and include the table. The main body of the paper will present your opinion as to why the currency exchange rate fluctuated over the five-year period. You must support your opinion with at least four in-text citations and include these citations, properly formatted, on the Works Cited page. © 2020 Penn Foster Inc. Economics 1 (v3) : Lesson 6 : Page 7 The economic analysis needs to include both sides of the currency exchange rate. There can be no exchange rate if there's only one side (one country). Therefore, the analysis must include the selected currency and the U.S. dollar. For this analysis, you're being asked to provide a minimum of four pages as a summary of your opinion. The parts of the paper should include: The introduction which states what the paper is about and includes a table with the exchange rates over the selected five-year period listed. The main body of the paper which discusses both economies providing an opinion as to why the exchange rate fluctuated and include in-text citations to show support for that opinion. Remember the in-text citations also need to be included on a Works Cited page. The summary or conclusion, which is a summary of what was presented in the introduction and main body of the paper. It should only be one or two paragraphs in length. Remember: Follow the writing guidelines, use 12pt font, double spacing, and the analysis needs to be a minimum of four pages. Step 5 Create a “Works Cited” page following APA guidelines as stated above. © 2020 Penn Foster Inc. Economics 1 (v3) : Lesson 6 : Page 8 Not having correct in-text citations or properly formatted citations is Plagiarism and warrants a grade of 1. Step 6 Proofread the draft getting ready for its submission. Put it away for a day or two and then come back to it. Good writing is about rewriting. Be sure to grammar check and spell check the paper. There is no excuse for having these types of mistakes. Step 7 When ready, submit your paper following the instructions for submitting your project. Grading Criteria Your project will be evaluated according to the following criteria: Introduction 20 percent Main Body (Analysis) 50 percent Summary or Conclusion 10 percent Written Communication 10 percent Format 10 percent Introduction Provides one or two paragraphs for an Introduction which also includes a table with the currency exchange rates for a consecutive five-year period © 2020 Penn Foster Inc. Economics 1 (v3) : Lesson 6 : Page 9 Main Body (Analysis) Provides an economic analysis for the currency selected Provides an economic analysis for the US Dollar Provides an opinion based upon the economic analysis of the two currencies as to why the exchange rate fluctuated during the fiveyear period Provides at least four valid citations to support the opinion stated The economic analysis is a minimum of four pages in length Summary or Conclusion Provides a clear summary or conclusion restating the analysis in one or two paragraphs Written Communication Uses correct grammar, spelling, punctuation, and sentence structure Provides clear organization and transitional words when necessary (such as first, however, on the other hand, consequently, since, next, and when) No typographical errors Provides in-text citations and includes citations on a Works Cited page Provides a minimum of four citations The paper is a minimum of five pages in length © 2020 Penn Foster Inc. Economics 1 (v3) : Lesson 6 : Page 10 Format Double-spaced 12pt font APA format Properly formatted citations and Works Cited page using APA guidelines Introduction 16-20 Points 11-15 Points 6-10 Points 0-5 Points Provides 1 or 2 paragraphs for an Introduction which also includes a table with the currency exchange rates for a consecutive 5-year period Provides 1 paragraph for an Introduction which also includes a table with the currency exchange rates for a consecutive 5-year period and has minor errors Provides 1 paragraph for an Introduction which also includes a table with the currency exchange rates for a consecutive 5-year period and has minor errors Provides an unclear Introduction or no introduction and includes an incomplete table with the currency exchange rates for a consecutive 5-year period or no table is included Main Body (Analysis) 40-50 Points © 2020 Penn Foster Inc. 30-39 Points 20-29 Points 10-19 Points 0-9 Points Economics 1 (v3) : Lesson 6 : Page 11 Provides an economic analysis for the currency selected and for the US Dollar with little or no errors. Provides an opinion based upon the analysis and includes three to four valid citations to support that opinion. The citations are properly cited in-text and the analysis is a minimum of three to four pages. Provides an economic analysis for the currency selected and for the US Dollar, but has minor errors. Provides an opinion based upon the analysis and includes two to three valid citations to support that opinion. The intext citations are cited with minor errors and the analysis is a minimum of three pages. Provides an economic analysis for the currency selected and for the US Dollar, but there are errors in the analysis. Provides an opinion based upon the analysis and includes one to two valid citations to support that opinion. The intext citations are cited with minor errors and the analysis is a minimum of two to three pages. Provides an economic analysis for the currency selected and for the US Dollar, but there are errors in the analysis. Provides an opinion based upon the analysis and includes one to two valid citations to support that opinion. The intext citations are cited improperly and the analysis is a minimum of one to two pages. Provides an economic analysis for the currency selected and for the US Dollar, but has many errors in the analysis. Provides an opinion based upon the analysis and includes one or no in-text citations and the citation or citations are invalid. The analysis is a minimum of one or fewer pages. Summary 6-10 Points 0-5 Points Provides a clear summary or conclusion restating the analysis in 1 or 2 paragraphs. Provides an unclear summary or conclusion restating the analysis in 1 paragraph or no summary or conclusion is provided. Written Communication 6-10 Points 0-5 Points Grammar, spelling, punctuation, and sentence structure has little to no errors. Provides clear organization and uses transitional words when necessary with little to no errors. Provides in-text citations and citations on a Works Cited page. Provides a minimum of 3 to 4 citations The paper is a minimum of 4 to 5 pages in length. Many errors with grammar, spelling, punctuation, and sentence structure. Unclear organization. Provides less than 3 in-text citations and a Works Cited page is incomplete or not included. Provides fewer than 3 citations The paper is less than 4 pages in length Format © 2020 Penn Foster Inc. Economics 1 (v3) : Lesson 6 : Page 12 6-10 Points 0-5 Points Formatting guidelines are followed and Formatting guidelines are unclear or not APA guidelines are followed with little to no followed and APA is incorrect or not errors. included. © 2020 Penn Foster Inc. Economics 1 (v3) : Lesson 6 : Page 13
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Economics Project: the United States and China Economy

Economics Project: the United States and China Economy
Students Name
Course Title
Instructor’s Name
Date

1

2

Economics Project: the United States and China Economy

The United States and China economics
Introduction
The United States and China are the two strongest economies globally, with the two
countries occupying 40.75% and 34.27% of the world’s total GDP in nominal and Purchasing
Power Parity. With both countries being the spear headers in the economy of the world, the
exchange rates vary with time with peaks and lows seen in both the United States Dollar
(USD) and Chinese Yuan Renminbi (CNY). Lately, the political tensions between the two
countries have been the major factor behind the variation in the exchange rates between the
two currencies. The Yuan has been the most affected as seen in the table. Although China’s
economy is fairly strong, the per capita income three times lower than that of the United
States which has a fewer number of people. China is ranked as the 72nd richest company far
behind the US, which is the 8th richest country in the world. Chinas population has majorly
been the reason behind the country’s inability to take over the economy from the USA with
the country posing a population of at least four times that of the United States. From the
table, fluctuations in both currencies have been seen with both currencies being affected, as
seen from the peaks and lows in the exchange rate.

Dates

USD/CNY

21-oct-2016

6.34366

CNY/USD
Inv.
0.15752

15-OCT-2016

6.73

0.14859

15-OCT-2017

6.58365

0.15200

1-APR-2018

6.26882

0.15923

15-OCT-2018

6.92192

0.14447

4-SEP-2019

7.17894

0.13930

15-OCT-2019

7.08761

0.14124

15-OCT-2020

6.72161

o.14887

Table 1: XE Currency Charts (2020). Retrieved October 16, 2020 Note: the bold figures show the start, peak, and low points
in the exchange rates.

Economics Project: the United States and China Economy

3

Chinas Economy
Gross Domestic Product (GDP)
Before the economic reforms that spearheaded China’s domination of the global
economy, the country was being suppressed by policies that made the economy weak.
However, with foreigners investing and trading with the country, the country had been able to
sustain its economy, leading to its rise to the world’s strongest economies level. As a fastgrowing economy with a high GDP growth rate, China has risen about 800 million people
from poverty. The country became the leading manufacturer and trader with a GDP that
doubled every year. As of the end of 2019, Chinas GDP was worth USD 14342.9 billion
amounting to at least 11.81% of the global economy. The economy of China has been
recorded as the fastest growing economy until lately, where its growth rates have
significantly declined with the country recording a GDP growth rate of 6.6% as of 2018 from
a rate of 14.7 in 2007 (Yang, Wang, Xia, & Zhang, 2019). As seen from the table, the value
of the Chinese Yuan was at its weakest in 2018, with the exchange rate hitting 6.26882, the
lowest rate since 2015. The figure shows that Chinas GDP is failing and would continue to do
so, given the circumstances. Economic analysts blame the drop on factors, some claiming that
this might be due to the political tension the country has with the United States.
Inflation
Perhaps the worst year for China with its economy, the country recorded an inflation
rate of 2.1 percent, with projections showing an increase to 3% in 2020 (Economics, 2017).
For a country that prefers to be ranked as an emerging country, China recorded the lowest
inflation but slightly higher than major economies like the United States. The results of this
are visible where the exchange rate hit its peak for China and Low for the United States. For
at least five months in 2019, China’s inflation rose due to increasing food prices. In March

Economics Project: the United States and China Economy

4

2019, the country recorded a food CPI of 4.1 percent, with a rise in the pork prices seen from
swine fever that affected Africa.
Labor and Employment Rate
China’s employment rate dropped from 65.6 percent in the previous year to 65.05% in
2019 despite benefiting from its labor force. With the country having recorded the greatest
rise in its employment rate by 2005, the government put across policies that would control the
sharp rise in the rate of employment. To expand its employment, the Chinese government
works on developing the tertiary industry which includes tourism, commercial trade, and
community services. The unemployed in the country are encouraged to venture into selfemployment while encouraging these setups to acquire laborers. The number of employed
people in China has been significantly decreasing as the economy faces major ripples. After
seeing growth in the past 40 years, it is unlikely that China would continue to witness any
form of growth as signs show a weakening economy. The economic slowdown in China
majorly impacted its employment opportunities, with the US-China trade war affecting
International trade.
Fiscal policy
The government’s share in the total revenues in china was increased as the country
changed the allocation and distribution of revenue amongst the different bodies in the
country. The government, in its aim of ensuring that the taxes are collected effectively, the
governmental tax collection and subnational bureaus were separated. The move was also in
the wake of the dropping tax/GDP ratio putting into doubt the government’s ability to
manage revenue. The results of the separation were seen after the revenue rose from 10.8% of
the GDP to a whopping 22.7% in the year 2013. With this, the government could balance the
growing expenditure keeping the fiscal deficit at 1.4 of the GDP in 2013. In 2015, Chinas

Economics Project: the United States and China Economy

5

fiscal revenue grew to 5.3 % amounting to at least1.1 trillion Yuan. For a long time, the
country has been having a centralized fiscal system as the government was in charge of
collecting all the revenue. The local governments were however left with fewer resource
allocation forcing them to rely on loans and property sales to sustain the activities. In 2015,
the country’s debt amounted to at least 15.6 % GDP with most of the debt coming from the
Bank of China.
Factors affecting China’s Economy
Political
As tensions escalate between the United States and China, it is propagated that the
Chinese Yuan could go to as weak as 7.4 against the USD. The drop could lower than the
incident in September 2019, where it hit its highest at 7.17894 (Table 2: XE Currency Charts
(2020). The tensions arise from the treatment of Muslims in Beijing and a security bill passed
in Hong Kong, both of which sparked tension between the two countries. These events are
however, not the first as the war between the countries have been in existence for a long time.
The major cause of the drop in the Yuan in September resulted from the trade war between
China and the United States. In August, president trump impounded at least $300 billion of
Chinese imports forcing the country into the worst exchange rate seen on the Yuan against
the dollar (Li & Lin, 2018).
China had acquired a stable economy with investors being certain of the increasing
value of the Yuan as the economy of China saw growth for over a decade. Upon taking his
office as president, China’s president vowed to shift the Chinas economy into a more marketoriented one. The country devalued the Yu...


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