Table 1.4 gives the foreign exchange rates for nine industrialized countries for the years 1985€“2006. Except for the United Kingdom, the exchange rate is defined as the units of foreign currency for one U.S. dollar; for the United Kingdom, it is defined as the number of U.S. dollars for one U.K. pound.
a. Plot these exchange rates against time and comment on the general behavior of the exchange rates over the given time period.
b. The dollar is said to appreciate if it can buy more units of a foreign currency. Contrarily, it is said to depreciate if it buys fewer units of a foreign currency. Over the time period 1985€“2006, what has been the general behavior of the U.S. dollar? Incidentally, look up any textbook on macroeconomics or international economics to find out what factors determine the appreciation or depreciation of a currency.

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TABLE 1.4 Exchange Rates for Nine Countries: 1985–2006 United South Year Australia Canada China P. R. Japan Sweden Switzerland Kingdom Mexico Korea 0.7003 8.6032 1985 1.3659 2.9434 238.47 0.257 872.45 2.4552 1.2974 7.1273 1986 0.6709 1.3896 3.4616 168.35 0.612 884.60 1.7979 1.4677 6.3469 1987 0.7014 1.3259 3.7314 144.60 1.378 826.16 1.4918 1.6398 0.7841 3.7314 2.273 734.52 1988 1.2306 128.17 6.1370 1.4643 1.7813 0.7919 1.1842 138.07 145.00 1989 3.7673 4.7921 2.461 674.13 6.4559 5.9231 1.6369 1.6382 1990 0.7807 1.1668 2.813 710.64 1.3901 1.7841 1.1460 1991 0.7787 5.3337 134.59 3.018 736.73 6.0521 1.4356 1.7674 1992 1993 1.4064 0.7352 1.2085 5.5206 126.78 3.095 784.66 5.8258 1.7663 0.6799 805.75 1.2902 5.7795 111.08 3.116 7.7956 1.4781 1.5016 1994 0.7316 1.3664 8.6397 102.18 3.385 806.93 7.7161 1.3667 1.5319 6.447 7.600 1995 0.7407 1.3725 8.3700 93.96 772.69 7.1406 1.1812 1.5785 108.78 1996 0.7828 1.3638 8.3389 805.00 6.7082 1.2361 1.5607 0.7437 1.3849 121.06 1997 8.3193 7.918 953.19 7.6446 1.4514 1.6376 9.152 1,400.40 1,189.84 9.459 1,130.90 9.337 1,292.02 10.3425 9.663 1,250.31 7.9522 1998 0.6291 1.4836 8.3008 130.99 1.4506 1.6573 1999 0.6454 1.4858 8.2783 113.73 9.553 8.2740 1.5045 1.6172 2000 0.5815 107.80 9.1735 1.4855 8.2784 1.6904 1.5156 1.6891 2001 0.5169 1.5487 8.2770 121.57 1.4396 0.5437 2002 1.5704 8.2771 125.22 9.7233 1.5567 1.5025 115.94 10.793 1,192.08 8.0787 2003 0.6524 1.4008 8.2772 1.3450 1.6347 1,145.24 1,023.75 954.32 2004 0.7365 1.3017 8.2768 108.15 11.290 7.3480 1.2428 1.8330 1.2115 2005 2006 0.7627 8.1936 110.11 10.894 7.4710 1.2459 1.8204 0.7535 1.1340 7.9723 116.31 10.906 7.3718 1.2532 1.8434 Source: Economic Report of the Prestdent, 2007, Table B-110, p. 356.