People usually think a "strong" dollar is good. Is this true for U.S. businesses, and does...

People usually think a "strong" dollar is good. Is this true for U.S. businesses, and does it help or hurt the U.S. balance of payments? please explain in 200 words

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Expert Solution

The strong dollar means appreciation of U.S. dollar in terms of another currency. When the domestic currency appreciates the exchange rate decreases because there is an inverse relationship between domestic currency and exchange rate. So when Dollar appreciates, it means another currency of the rest of the world have depreciated, so the U.S. goods and services become expensive and rest of world goods and services have become cheaper. So the import of the U.S. increases and export of the U.S. decreases and a result the balance of payment becomes negative and so it hurts Balance of payments. This is good for an importer of U.S because they can purchase the goods and services from the rest of the world at a lower price and they can take the benefits of the high-profit margin. But the U.S. residents will not be benefitted with this only the sellers will be better off.

Hence the overall impact is that the strong dollar is not good for the United States of America.

Hence strong dollar is not good for the U.S. businesses. Therefore it is not good for the U.S.

Rahul Sunny answered 1 year ago

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