Question

The US dollar is strong. Assess its impact on each of the following categories of US...

The US dollar is strong. Assess its impact on each of the following categories of US firms, in three ways (positive, negative, unchanged).

  • Export firms
  • Import firms
  • Domestic firms
  • Multinational firms
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Answer #1

Export firms negative, as upon the conversion of the foreign currency fewer units of the domestic currency is obtained.

Import firms: Positive , as fewer dollars are required for purchasing goods from the foreign country.

Domestic firms : unchanged, as most of the business operations are carried within US only. The currecny fluctuations affect those firms more which are in the import and export business.

Multinationals: Negative . If the US multionational company is carrying out operations world wide, then a weak dollar can give them higher units of dollars upon converison.

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