What is the impact of the difference in inflation on foreign exchange

When inflation, the central bank interest rate is generally raised, assuming that China's inflation is serious, the interest rate is 5%** liquidity, and the US interest rate is 1%. I will borrow 1 million from the United States and save it to China, so I will make a profit of 4% a year. This has led to an increase in demand for the renminbi and an appreciation of the renminbi.

In general, inflation causes the country's currency to exchange rate**, and the easing of inflation can increase the exchange rate. Inflation affects the value and purchasing power of the local currency, which will lead to a weakening of the competitiveness of export commodities and an increase in imported goods, and will also have a psychological impact on the foreign exchange market and weaken the credit status of the local currency in the international market. All three of these effects can lead to a depreciation of the local currency;

The difference between the price level and the inflation level, under the paper money system, the exchange rate is fundamentally determined by the real value represented by the currency. According to the purchasing power evaluation, the ratio of the purchasing power of a currency is the currency exchange rate. If a country's price level is high and inflation is high, it means that the purchasing power of the local currency has decreased, which will lead to the depreciation of the local currency.

Otherwise, it tends to appreciate.

Inflation refers to a sustained general rise in the general level. This definition illustrates: (1) inflation is not a short-term or one-time rise in the ** level, but a continuous rise in the ** level; (2) Inflation does not refer to the rise in the level of individual goods, but refers to the increase in the overall level, that is, the weighted average of all goods and services; (3) The magnitude of the increase in the level of inflation depends on the sensitivity of economic agents to the rise of **.

The difference between domestic and foreign inflation is the dominant factor in determining the long-term trend of the exchange rate, and the ratio between the two countries is determined by the value they represent under the condition of non-cash credit money. If a country's inflation is higher than that of other countries, that country's currency tends to depreciate in the foreign exchange market; Otherwise, it will tend to appreciate.

The economy has collapsed seriously, and many things have been seriously affected, prices are also very bad, and everyone's wages are also very low, which affects finance and the economy.

Hyperinflation is followed by a severe depreciation of the currency. The price level will rise sharply. The national wealth will shrink severely, making life difficult for the people.

It will make money worthless, it will affect the exchange rate, it will make people's living standards plummet, and they will not be so active when selling things.

The impact of inflation on the economy can be analyzed from the following aspects:

Consumers: Inflation leads to prices**, and consumers need to spend more money on the same goods and services. This leads to lower income levels for consumers and reduces their spending power.

Businesses: Inflation leads to higher production costs for businesses, which leads to lower corporate profits. If a business cannot improve the quality of its products and services, it may face operational difficulties.

Financial markets: Inflation leads to higher interest rates, which leads to an increase in borrowing costs and a decrease in borrowing demand. At the same time, inflation can also lead to currency depreciation, affecting international** and investment.

Policy: Fiscal and monetary policies may be adopted to control inflation, such as adjusting interest rates and fiscal spending. These policies are likely to affect economic growth and employment.

1 The aggregate demand and aggregate supply model can be plotted. Then it is explained that the input ****, the manufacturer's production cost rises, the profit decreases, the output decreases, and the AS shifts to the left, resulting in the increase of **p and the decrease of output q;

2 Further analysis will show that the results of influencing the macroeconomic mechanism will appear, the price level will rise, income will be redistributed, enterprises that produce resources will make profits, and investment will increase, while enterprises that mainly invest resources will lose profits due to rising costs, products will rise, and consumer interests will be damaged. In the long run, it is possible to point out the possibility of cost-push inflation and explain its impact results.

3. Discuss the current international and domestic situation and briefly put forward countermeasures. For example, the investment in international oil, iron ore, aluminum, zinc and other metal resources remains high, China's large import foreign exchange losses, and the impact of rising domestic prices in this industry; On the other hand, the excessive investment of enterprises in this industry has caused duplicate construction of resources, waste and environmental pollution, as well as income redistribution, consumer analysis of the gains and losses of different enterprises, and finally pointed out the national macro shorting, especially the policies that the People's Bank of China should take, such as raising the industry loan interest rate, raising the reserve gold Kai type, window guidance and other measures that the central lead seepage bank Cong Sun Hao is taking.

Evaluation: Since the beginning of this year, this question examines the impact of rising prices on the macroeconomy, implying the strategies and research priorities that the central bank should adopt, the problems that China currently needs to solve urgently, and the hot spots in the hot spots.