Question

Opinion about Strong Dollar

Recently U.S. dollar has been very strong relative to the major currencies. Do you like it? How could a strong dollar affect U.S. firms?

Answer 1

SOLUTION:-

* As the dollar becomes stronger (worth more) relative to a foreign currency, one dollar is equivalent to (can be exchangeed for) more foreign currency.

* When the dollar increases in value, foreign goods become less expensive relative to American goods; thus you are more likely to buy Foreign-made goods than American-made goods.

* The resulting drop in demand for American-made goods because of the strong dollar hurts American goods manufacturers.

* On the other hand, the Anerican company that imports goods into the United States now finds the demand for its product has risen, so it is better off when the dollar is strong.

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