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In 2002, our traveler would have received about C$1.60 in
Canadian currency
for every U.S. dollar. We could say that the exchange rate at
that
time for the U.S. dollar/Canadian dollar was about 1.60 Canadian
dollars
per U.S. dollar. If we wanted to be precise, we could add
several decimal
spaces, and express the exchange rate as 1.6000.
In the years that followed, the exchange rate changed
dramatically,
and by 2006 it had fallen to 1.10. This meant that a traveler
from the United
States to Canada in 2006 would only receive about C$1.10 in
Canadian currency
for every U.S. dollar exchanged.
If we wanted to measure very small changes in this exchange
rate, it
could be expressed as 1.1000. We can safely say that the U.S.
dollar depreciated
significantly against the Canadian dollar during the early part
of the
twenty-first century.
How does this affect our traveler? As the U.S. dollar/Canadian
dollar
exchange rate fell, U.S. dollars bought fewer Canadian goods and
services.
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A U.S. citizen landing in Toronto used to enjoy receiving a
thick wad of
cash from the airport’s currency exchange kiosk. Visitors from
the United
States would spend freely, because goods and services seemed
inexpensive
compared to the prices at home.
As the Canadian dollar gained strength against the U.S. dollar,
all of
this changed. Eventually, the Canadian dollar approached parity
to the U.S.
dollar.
While this had a negative impact on visitors from the United
States,
Canadian travelers were pleased to find that U.S. goods and
services were
now relatively cheap. As the U.S. dollar weakened, the
comparative buying
power of the Canadian dollar grew.
U.S. citizens were now less likely to visit Canada. If they did,
they were
likely to spend less than they would have in the past, when the
exchange
rate was more favorable. Canadian travelers, however, were more
likely
to visit the United States, since the Canadian currency bought
more U.S.
goods and services than it had previously. |
