Question

Should we have a stronger dollar or a weaker
dollars
please answer it by typing

Answer 1

To answer this question, the following points are important to note -

1. Consumption is nearly 70% of US GDP and this has translated into sustained trade deficits as imports exceed exports

2. Trade deficits coupled with high government spending has resulted in nearly $22 trillion in federal debt.

With this as an overview, it is important to have a weak dollar than a strong dollar in the current scenario.

The reason is that a weak dollar increases the purchasing power of other currencies as compared to the dollar. This helps in boosting exports. On the other hand, a weak dollar makes imports more expensive as the purchasing power of the dollar declines. This helps in reducing exports on a relative basis. With relatively higher exports and lower imports, the United States can narrow the trade deficits. It is therefore important to have a weak dollar.

As exports get a boost, the domestic production also increases and so does investment spending to cater to the higher demand for exports. Therefore, a weak dollar also helps in investment spending in the manufacturing sector. over the long-term, this can help in creating a finer balance between consumption spending and production in the economy.