Question

As is often seen during a recession in the U.S., some domestic businesses profit from a falling dollar. Your text mentions various factors that influence the value of a currency. Consider the effect of perceptions of economic stability. As the U.S. economy weakens, foreign investors demand less dollars.

1. How does the lower demand for U.S. dollars affect the value of the U.S. dollar, and consequently, is this good or bad for U.S. businesses looking to sell abroad?
2. Discuss another real-world example of how changing currency values have affected people’s daily lives.

Answer 1

Lower demand for US dollar on account of the economic instability and recession in thw nation will lead to USD weakening against other currencies and hence will make imports costlier into US which may cause inflation at the same time US exports will become cheaper to other nation or become competitive Hence will benefit the US Export sector or business looking to sell abroad. Changing currencies value will affect significantly for example weaking of USD will have its impact in the Gasoline imported from Gulf and will become costlier,sameway other imported products including cellphone, TV's all wil become costlier at the sametime exports from US will become competitive and these businessea will create job opportunities.