Suppose that as the result of the crisis in Greece, the Euro depreciates against the US...

Suppose that as the result of the crisis in Greece, the Euro depreciates against the US dollar. Why should you care when the US dollar strengthens relative to other currencies? Describe the ways this could impact your life and that of your friends and family in the US. Use numerical examples that will be a strong answer that explains the idea of a depreciation versus an appreciation word count should be 400 words and provide a reference

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Expert Solution

If Euro depreciates against USD, it will have implications across Greece and larger European union. European Union is one of the largest trading partner of US. If the USD appreciates, for any goods import in Greece or any EU country, people will have to pay more Euros to purchase same goods which they used to purchase at certain price. This will have negative effect on their consumption pattern and overall lifestyle. In general any goods which are used by people in Greece and are imported from US will be costlier.

On the other hand anyone who is exporting goods to US will be beneficiary in this case as he will receive more local currency i.e. Euro as compared to earlier before slide of Euro against USD. This will be overall effect on the family in Greece.

For a family in US, similar rule will apply. If they want to have a vacation in Greece, their vacation will now be cheaper as compared to earlier before slide of Euro. They will be spending Euros in Greece and will get more Euros as compared to earlier before slide of Euro against USD. For a family, any good that they are using if being imported from Greece will be cheaper now, whereas any good exported to Greece will be costlier now is the bill is in USD terms.

This will be overall general effect of currency fluctuation on family in Greece and US.

Rahul Sunny answered 1 year ago

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