Two Economics Discussion.
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Brenda Sutton Sutton posted Jun 25, 2020 12:26 AM
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A) How does the lower demand for U.S. dollars affect the value of the U.S. dollar, and consequently, is this good or bad for U.S. businesses looking to sell abroad?
The U.S. dollar decreases when the value of the dollar is lower comparing it to other countries currencies in the exchange market. It means that the index of the dollar falls which is a good and bad thing. Its bad because that means euros can have a stronger value and can buy more dollars when the U.S. currency weakens. A weaker dollar buys less in foreign goods which means that will increase the price of imports contributing to price increases. On the good side a weakening dollar helps U.S trades, which means that their goods will seem cheaper to foreigners and that will boost the economic growth in the U.S, which will attract foreign investors to U.S stocks. In other words the lower demand for the U.S. dollar reduces the value of the dollar. This means dollar will fetch less of the other currencies now that it used to before the decline in demand. This means that the exchange rate for the dollar decrease. investors payless than face value and receive a higher yield.
B) Discuss another real-world example of how changing currency value that have affected people’s daily lives .
Consider oil prices as a example, when the dollar strengthens, it make American made goods more expensive and less competitive compared to foreign produced goods. This reduces U.S. exports and slows economic growth. Its also leads to lower oil prices, as oil transacted in dollars. Whenever the dollar strengthens, oil-producing countries can relax the price of oil because the profit margins in their local currency are not affected. For example, if the dollar is worth 3.75 in one country. A barrel of oil worth one hundred dollars which make the cost 375 dollars in that country. If the dollar strengthens by 20% in another country's currency the valve of the dollar that is fixed to that country has also risen by 20% against the country currency that strengthen by 20%.
References
Lioudis, N. (2018, June 15). 3 factors that drive the U.S. dollar. Retrieved March 18, 2018, from https://www.investopedia.com/articles/forex/09/factors-drive-american-dollar.asp
Jorge Rodriguez posted Jun 23, 2020 11:54 PM
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1. How does the lower demand for U.S. dollars affect the value of the U.S. dollar, and consequently, is this good or bad for U.S. businesses looking to sell abroad?
In regard to the depreciation of the US dollar depreciation and what factors influence it, one believes that it depends on the economy. The dollar is considered strong when it rises in value against other currencies as one read in this week’s slides. If the dollar is strong it can buy more foreign currency than before. An example would be a strong dollar would benefit us as tourist overseas but in return anyone living overseas would not be wise to visit the us as it puts them in a disadvantage. This is a win for us Americans as it makes us purchase cheaper imports and cheaper foreign travel. This as result hurts us nationally as local companies who relay in export there goods for example in El Paso Texas we have a big dairy farms our next door city of Las Cruses has a huge Pecan Farms and Hatch New Mexico has a Huge Hatch green Chile as all these products are sent internationally if a strong dollar is in play there export output would be on a decline and there business would hurt .
2. Discuss another real-world example of how changing currency values have affected people’s daily lives.
This has a direct connection to my day to day life. As one has stated in previous discussions and papers, I’ve always lived in a border town next to Mexico. Before Covid and I was younger we were always taking trips next door to but groceries why the dollar has always been worth more than the Mexican Peso, so our value allows us to purchase more items with less money. When one was 18 go out in Mexico was amazing as a whole night of partying would cost average ¼ of the price one would spend in the U.S. Now that awesome for us U.S citizens but currently the Mexico peso is exceptionally low. As I went to Nogales Mx 1 us dollar is the same as 22 pesos which is amazing for me but my family who work and live a nice life and have great Jobs they are hurting as they have to pay 23 pesos for 1 dollar for them to use in out economy so there is no win win factor as it will only benefit one and not the other . Hopefully as Mexico’s economy returns back to prospering, we will see the exchange rate lower to an average 16 pesos for 1 US dollar.
https://www.investopedia.com/articles/forex/051415/pros-cons-strong-dollar.asp