Answered: To me I’m on the fence for the dollar…

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Open-economy Macroeconomics: Basic Concepts

Section13.3: A First Theory Of Exchange-rate Determination: Purchasing-power Parity

Problem 3QQ

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To me I’m on the fence for the dollar being strong. One of the benefits of the dollar being strong means us, US citizens spend less money on imports. Goods produced in foreign countries will be imported for cheaper if the company producing the products currency falls below the dollar. If the dollar keeps strengthening and import prices keep falling US citizens will have more money to spend. Another benefit is cheaper traveling to foreign countries. You will be able to use less US dollars to get more money and goods abroad. A negative of a strong dollar is it will decrease tourism in the US since it will cost more to travel here. Another negative is the exports will become more expensive and international businesses will be hurt if they deal in foreign currencies. Being a citizen in the US it would be great to have a strong dollar, however as a company exporting or partaking in business in a foreign country could potentially harm your business.

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