--%>

Export business prefer rising or declining dollar

Would export businesses choose a rising or declining dollar? Would it be similar for a European tourist on a budget and visiting the Grand Canyon? Explain your answer.

E

Expert

Verified

Export businesses would prefer a declining dollar. Yes, it would be the same for a European tourist on a budget and visiting the Grand Canyon. As the dollar declines, more dollars are necessary to buy a specific amount of foreign currency and less foreign currency to exchange for more dollars. Thus in the case of US exports, a declining dollar facilitates the improvement of sales in foreign countries, because the US goods will be available cheaper. In short, US export goods become comparatively less expensive as compared to domestic goods. More foreign consumers will hence prefer buying US goods. Hence US companies will naturally export more goods to make profits out of the available opportunity. Thus export businesses would prefer a declining dollar.

In a similar manner, when dollar declines, travel to US becomes less expensive for foreigners, since they can exchange their currency for more US dollars. When a European tourist visits the Grand Canyon, he/she can exchange less Euros for more dollars, which could be spent as his/her tourism expenses. So tourists on budget can easily afford to visit US in a period of declining dollar. Thus export business and foreign tourists would prefer a declining dollar (Federal Reserve Bank of Chicago, 1997).

   Related Questions in Macroeconomics

  • Q : Paradox of Value-total utility and

    I have a problem in economics on Paradox of Value-total utility and marginal utility. Please help me in the following question. Water is more precious than diamonds when measured by _____, however less valuable when measured by _____. (i) Total cost, total benefit. (i

  • Q : Purpose of Balance of Payment Meaning:

    Meaning: - as mentioned above, the balance of payments is a periodic accounting of international economic transactions. Each country having regular economic transactions with other countries prepares periodically the final accounts of their foreign receipts and paymen

  • Q : Consumption curve Illustrate a point on

    Illustrate a point on consumption curve at which APC = 1. Answer: APC = C/Y = 1 is possible when C = Y, that is, Consumption is

  • Q : Purchasing and consumption of

    The usual household maximizes the utility by spending all its money to purchase and consume a combination of goods which yields: (1) Fundamental physiological requirements and customary wants. (2) Maximum status and the social prestige. (3) Complete satisfaction of al

  • Q : Nominal GNP problem The value of

    The value of nominal GNP of an economy was Rs. 2,500 crores in a specific year. The value of GNP of that country throughout the same year, computed at the prices of some base year was Rs.3000 crores. Evaluate the value of GNP deflator of the year in terms of percentag

  • Q : Definition of surplus Definition of

    Definition of surplus: It is a condition in which quantity supplied is more than quantity demanded. To remove the surplus, producers will minimize the price till the market reaches to equilibrium.

  • Q : What points out revenue deficit What

    What points out revenue deficit? Answer: Revenue deficits are stated as the surplus of revenue receipts. Revenue Deficit = Revenue Expenditure - Revenue Recei

  • Q : Employment Effect Fiscal policy

    Fiscal policy measures used for achieving full-employment level of output and price include increase in the government expenditure and cut in tax rates. A cut in tax rates eliminates only the adverse effect of high tax rates, whereas an increase in government expendit

  • Q : Define Quantity of a good Quantity of a

    Quantity of a good: The quantity of a good which buyers demand is found out by the price of the good, income, the prices of associated goods, expectations, tastes, and the number of buyers.

  • Q : Consumer Surplus and Producer Surplus

    In a graph of competitive market in equilibrium, the net surpluses producers and consumers enjoy generally equivalents the area among the: (i) Demand and supply curve however to the left of point of the market equilibrium. (ii) Horizontal axis and a 45°line origin