What Causes An Appreciation In The Exchange Rate

An appreciation in the Exchange rate can occur for various reasons. The most significant reasons include higher interest rates and lower inflation. An appreciation of the exchange rate can have a significant impact on a country's economic growth and inflation therefore it is important to understand what can cause an appreciation in the exchange rate.

1. Higher interest rates. If interest rates rise then it makes it more attractive to save money in UK banks and UK financial securities like bonds. Therefore this causes increased demand for sterling to deposit money in the UK. This is called "hot money flows" The higher demand for sterling causes an appreciation of the exchange rate. It is a significant factor because of the high volume of foreign exchange which is transferred between countries to take advantage of differences in interest rates.

Economics

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2. Inflation Rates. If inflation in the UK is lower than elsewhere then it makes UK goods relatively more attractive. Therefore there is an increase in demand for UK exports and therefore higher demand for sterling this will cause an appreciation. This is a significant factor in the long term.

What Causes An Appreciation In The Exchange Rate

3. Speculation. A lot of exchange rate movements are due to speculation. If people think an exchange rate may increase in the future then they will buy now to try and make profit. Therefore this speculative buying causes significant fluctuations in the exchange rate. The attitude of foreign currency dealers to an economy is very important for determining the exchange rate.

4. Increase in competitiveness. This is related to lower inflation. If a country becomes more competitive because of increased labour productivity then there will be more demand for UK goods and the exchange rate.

5. Current Account Surplus. This means the value of imports (of goods and services) is less than the value of exports. Therefore more foreign currency is coming into the country than going out. (although it may be offset by a surplus on financial / capital account.

What Causes An Appreciation In The Exchange Rate

View More: Economics Essays

Richard Pettinger studied Politics and Economics at Lady Margaret Hall, Oxford University. He now works as an economics teacher in Oxford. He enjoys writing essays on Economic and he edits a site - Economic Help which includes a blog about latest developments in Economics http://www.economicshelp.org/econ.html

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Do Cold Air Intakes Increase MPG?

While reduced engine noise is of benefit to most consumers for inefficient stock factory installed air filters. I believe that a truck should look, feel, sound and perform like a truck. This performance begins with after market truck parts called cold air intakes. Stock air tubes and filter boxes drop the volume of air delivered to the combustion chamber. And, because your stock intake system completely confines the air box in your engine compartment, the air is usually hot when taken in. This combination of limited and warmer air causes fuel-rich combustion mixtures (to much fuel) that does not burn at maximum power or efficiency thus having a negative effect on your truck fuel economy.

The best cold air intakes or performance air intake kits solve a few of these problems in one impressive unit. First, a performance air intake replaces your stock intake tube with a wider pipe that has fewer bends. The result is a higher volume of air that flows more freely. The resulting effect fills your combustion chamber with more oxygen molecules for igniting fuel at a balanced, efficient mixtures that maximize power and an increase in fuel economy.

Economics

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The best cold air intake systems employ specially-shaped intake tubes designed to straighten airflow as much as possible. These pipes are typically mandrel-bent or custom molded because your engines relies on a balanced mixture of fuel and air for combustion the currently, your vehicle draws air through the original manufacturer's intake tube and air box. typically it is loaded with a disposable paper air filter. Automakers design your vehicle's intake tube to be the quietest possible not the most efficient or productive.

Do Cold Air Intakes Increase MPG?

Cold air intake kits models also relocate the air box outside the engine compartment, where cooler air can be sucked in by the air filter. The typical relocation spot for a cold air intake's air box is in the upper wheel well above the tire. Taking in cooler air for combustion means an air mixture that's denser with oxygen molecules for a better burn and ultimately more power.

Not all performance intakes are cold air intakes, not all cold air intakes are the best. Rely on brands like AEM and K&N cold air intakes and air filters. Precise engineering will maximize the potential of your engine. Companies like K&N FIPK cold air intakes, AEM Brute Force air intake systems and do not earn best in class reputations by manufacturing flimsy cold air intakes.

Do cold air intakes increase mpg? The answer is Yes! performance air intakes, help your engine to work more efficiently. The power of an engine is directly proportional to the amount of air drawn into a cylinder and retained until ignition. To increase the engine power, increase the airflow capacity, and or the air-fuel charge which must be burned more effectively. Most factory engines "volumetric efficiency" is a compromise between fuel economy, efficiency, reliability,noise and performance. Thus adding a performance cold air intakes like K&N air filter is the first step to increasing fuel economy for your truck.

Do Cold Air Intakes Increase MPG?

With today's volatile fuel markets and uncertain political agendas, it is possible through a combination of after market truck parts to increase your trucks fuel economy. Being a former contractor with a degree in economics founder Monty Cassel started Truck Economy [http://www.truckeconomy.com/truck_air_intake_systems.html] to pull together the best after market truck parts including the industries best best cold air intakes, best performance spark plugs, performance exhaust systems and fuels additives.

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Adam Smith - Published Works by the Father of Modern Economics

We all know that Adam Smith is know as the Father of Modern Economics because he was above all a system builder. He was a British political economist and philosopher. His woks can be described as being the foundations of economic theory. His collective books were included in The Wealth of nations Book 1 to 3. It is within those books that eighteenth to present day economics are studied upon. There is a proof that he began to make a general system analysis for almost two decades before the publication of The Wealth of nations, and the summary of that system were clearly visible before 1776. Smith's system are mixed with a theory of human nature and a theory of history with a distinctive form of natural theology and some practical observations of economic life.

According to the book of Nebres titled Economics: Concepts, theories, and application, he mention that " The wealth of nations has also provided for possibly, more than any other single work in its field, as a lead to express systematically government's economic policies." This means that through this range of vision, has subjected to considerable modification by economists in the light of historical growth since Smith's time.

Economics

There are several key concepts of the Wealth of nations that Smith mention of how wealth is produced and distributed in society.

Adam Smith - Published Works by the Father of Modern Economics

First, is the division of labor

Second is Wage rates.

Third is the distribution of wealth.

Fourth is the natural and market prices.

Fifth is Smith and mercantilism.

Sixth is law of diminishing returns.

Seventh is Smith and physiocracy.

Eighth is natural product.

Ninth is governments.

Tenth and the last concept is human conduct.

Adam Smith - Published Works by the Father of Modern Economics

Book
Abriel M. Nebres " Economics:Concepts theories and application"
National Bookstore: Mandaluyong, Metro Manila, 2008. page 235

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Problems Facing American Economy

The US economy is the largest economy in the world, with one of the highest GDP per Capita. However, despite its position as the most powerful economy, it now faces many serious economic problems. Some of these are short term, but some of them reflect an underlying weakness.

National debt and Government Borrowing

Economics

Due to decades of government borrowing the US national debt is fast approaching ,000 billion, or more than 65% of GDP. The consequence of such high levels of national debt is to increase the cost of interest payments. It also limits the potential for future tax cuts and higher government spending. High levels of government borrowing can also lead to crowding out. Where government borrowing reduces private sector spending.

Problems Facing American Economy

Current Account deficit and External Debt

In the past 2 decades US economic growth has mostly been financed by high levels of consumer spending. This consumer spending has created an increase in imports that has not been met by a corresponding increase in exports. At its peak the US current account deficit reached 7% of GDP. This current account deficit was financed by foreigners buying US securities. It means that most of the US external debt is held by Chinese, Japanese and other investors. A current account deficit has contributed to the declining dollar and remains a constraint on economic growth

Housing Market

It is estimated US house prices have fallen by 10% in the past 12 months. Although there are many different ways to measure house price statistics, most people will agree that US house prices are falling. There is a combination of oversupply and falling demand due to uncertainty about the future of the housing market. Declining house prices can be a powerful disincentive for consumer spending. As house prices fall, consumers see their wealth decline leading to lower economic growth. It is feared that falling house prices could alone tip the economy into recession.

Low savings Ratio

The low savings ratio is linked to the current account deficit. It is a result of consumer led growth. It is also a result of increased personal borrowing levels. It is suggested that the economic growth has been based on an unsustainable footing. It means that the American consumer is susceptible to any rise in interest rates.

Rise in Commodity prices

Despite a slowdown in the US economy, we have seen a rise in cost push inflation. In particular rising prices of oil, wheat and soybeans have created problems for the US economy. It could lead to a situation of stagflation - rising prices and falling growth.

Updated: more in depth analysis of the problems facing the US economy.

Problems Facing American Economy

Richard Pettinger studied Politics and Economics at Lady Margaret Hall, Oxford University. He now works as an economics teacher in Oxford. He enjoys writing essays on Economic and he edits a blog on Economics - Economic Help. http://www.economicshelp.org/blog

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