Question

This is our last discussion of the quarter, it's about the Currency Exchange and its effects on the macroeconomics:

1) Compared to Three (3) other currencies such as Canadian, Euro, China, and Japan (or other currencies you have interest in), please find out if the US Dollar currency has appreciated or depreciated since one year ago?

2) What are the effects of the appreciated/depreciated US dollar to the economy of the United States? State two positive effects and two negative effects.

Answer 1

1) With respect to the Canadian currency the USD has appreciated cause as on last year 1 USD = 1.34 CAD, and now it is 1.36. More canadian dollars for one US dollar.

Euro has been stable as compared to last year, it was 0.89 / USD which is the same now.

USD has appreciated against Chinese Yuan. Last year it was 6.93/USD, Now it is 7.08/USD.

USD has depreciated against Japanese yen, Last year it was 108.56/USD, now it is 107.32/ USD.

2) Overall USD has appreciated against major currencies which means the demand for dollar is high. Thus the two positives are that the country is able to import more as it has to pay less because its value is higher as compared to the other currency. Demand for imported products increases and imports turn cheap which reduces inflation.

Negative effects are that exports turn out to be expensive as they get less money on the exports because of appreciation. For example earlier if they exported a fan of 1.34 CAD they used to get 1USD, now they have to export fan of 1.34CAD plus something of 0.02 CAD (1.34+0.02=1.36) to get 1 USD. Balance of payment position deteriorates as factories produce less goods as they don't earn that much return and quantity of exports fall.