Is a stronger dollar good for the U.S. economy? Describe who would be the winners and...

Is a stronger dollar good for the U.S. economy? Describe who would be the winners and losers from the appreciation of the U.S. dollar against the currencies of our major trading partners (Euro, Japanese Yen, Chinese Yuan, British Pound, Mexican Peso)?

Expert Solution

A rising dollar relative to other currencies makes import cheaper for US consumers while making the exports costlier for foreign buyers. From the export point of view, the weaker dollar would help to increase the exports as lesser currencies are needed to purchase US goods for other countries. While a strong dollar would help in imports, however a weaker dollar would increase net exports leading to increased surplus current account.

Currency	Appreciation of US dollars
Euro	Euro Winner	US loser
Japanese Yen	Yen Winner	US loser
Chinese Yuan	Yuan Winner	US loser
British Pound	Pound Winner	US loser
Mexican Peso	Peso Winner	US loser

However a strong dollar would increase demand for dollar which increases the interest rates and capital inflow. Also a strong dollar increases investment and output thereby increasing the standard of living. So a weaker dollar helps in export of this output by reducing the imports.

Rahul Sunny answered 2 years ago

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