Question

In December 1993, one unit of U.S. dollar was worth 5.8 units of Chinese Yuan. By...

In December 1993, one unit of U.S. dollar was worth 5.8 units of Chinese Yuan. By January 1994, the value of one U.S. dollar had changed to 8.7 units of Yuan. Answer the following question.

Identify the winners and losers in the United States from this alteration in the exchange rate. Explain your answer.

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Answer #1

The winners in the United States from this alteration in the exchange rate are the exporter of the goods and services because they will get more Chinese Yuan for the goods and services sold to the Chinese. On the other hand, the losers in the United States from this alteration in the exchange rate are the importers of the goods and services because the importers have to pay more Chinese Yuan for the goods and services imported from China. Therefore, this appreciation of the US dollar against the Chinese Yuan will benefit the exporters as compared to importers.

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