In our final week our entire focus is on the value of the dollar relative to other currencies and the impact on our economy when the valuations between currencies change, i.e., impacts on imports and exports.
Example: a decrease in the U.S. exchange rate can help domestic firms that export to other countries and at the same time can have a negative impact on firms that import their inputs from overseas. Given that the U.S. dollar declined against the Great Britain pound U.S. automobile manufacturers will have a price advantage when selling comparable luxury cars in England. Your task for this week is to complete the following assignment by Wednesday and then respond to at least two of your classmates’ posting by Saturday:
- In recent news there was a discussion about the possibility that some European Union members were considering a strategy of intentionally devaluing their currency against the dollar in order to increase exports. Explain how it is possible for a country to intentionally devalue its’ currency and then define the benefits and consequences of this strategy.
