Quote:
Originally Posted by FlamesAddiction
Actually, the whole reason I started thinking about this is because I am looking for a car.
Someone is going to have set me straight, because clearly don't understand how any of this works, but I was under the impression that because of free trade, the market values for products produced in both the US and Canada should be fairly unversal. Of course, with our low dollar (and the subsequent lower buying power), prices in Canada were adjusted to account for that.
But with our dollar approaching par with the U.S., howcome prices for goods don't reflect this? Shouldn't they be changing?
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They will, but the effect of changing exchange rates on durable goods can be extremely slow to adjust. Perishables will react much quicker, but in textbooks I've read exchange rates can take years for economies to fully adjust to.
Manufacturers still have parts inventories, production inventories, contracts, and so on that need to cycle through before the full results are seen. Yeah, the current prices will immediately affect the bottom line, but there is only so much flexibilty built in.