An economist claims that the drop in the value of the US dollar is good for the

Question

An economist claims that the drop in the value of the US dollar is good for the US economy because the depreciation of the US dollar increases exports. On the other hand, another economist argues that the drop in the value of the US dollar is not good for America because the drop in the value of the currency raises the prices of imported products including oil or other imported consumer goods from foreign countries, which in turn increases the overall prices in the US.
Who do you support? Why? **Please answer in atleast three/four paragraphs and use support

Explanation / Answer

if we wantedly modify the currency values, not considering the market forces, definitely it provides some positive as well as negative aspects.

if we consider depreciation of dollar, the benefits are: more and more firms interest to export to US and those products will be available at more places. new investors will be show interest to invest in US. exports become cheaper and more competitive to foreign buyers. therefore, this provides a boost for domestic demand and could lead to job creation in the export sector. higher level of exports should lead to an improvement in the current account deficit. This is important if the country has a large current account deficit due to a lack of competitiveness. higher exports and aggregate demand can lead to higher rates of economic growth.

the disadvantages are: it causes to more inflation, domestic investors and consumers lose their purchasing capacity, Aalarge and rapid devaluation may scare off international investors. it makes investors less willing to hold government debt because it is effectively reducing the value of their holdings.

on the other hand if we appreciate the dollar value, then our currency become more stronger and other currencies become more cheaper. the advantages are: domestic investors and business people who goes for exports they will be benefited.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.