Business Finance
Free Trade & Foreign Exchange

Question Description

Explain the difference between absolute and comparative advantage.Explain how exchange rates work. List some exchange rates between the U.S. and some other countries.What are the pros and cons of having a weak dollar? ORIGINAL ANSWERS ARE THE BEST!

Final Answer

Comparative advantage at producing something if it can be produce it at lower cost than anyone else. Absolute advantage refers to the ability of a individual, organization and/or country  to produce more  goods or services than competitors. The main difference is a joint venturing partnership. 

An exchange rate is the amount one currency is worth in another at a given time and affected by international exchange markets.

1.00 Euro Rates table

Top 10 Jun 17, 2014 18:16 UTC
Euro 1.00 EUR inv. 1.00 EUR
US Dollar 1.354018 0.738542
British Pound 0.798584 1.252216
Indian Rupee 81.701445 0.012240
Australian Dollar 1.450808 0.689271
Canadian Dollar 1.471265 0.679687
Emirati Dirham 4.973581 0.201062
Swiss Franc 1.218568 0.820635
Chinese Yuan Renminbi 8.381159 0.119315
Malaysian Ringgit 4.362105 0.229247
New Zealand Dollar 1.565751 0.638671
this graph is from forex exchange

Weakening Dollar


U.S. firms find it easier to sell goods in foreign markets

U.S. firms find less competitive pressure to keep prices low

More foreign tourists can afford to visit the U.S.

U.S. capital markets become more attractive to foreign investors


Consumers face higher prices on foreign products/services

Higher prices on foreign products contribute to higher cost-of-living

U.S. consumers find traveling abroad more costly

Harder for U.S. firms and investors to expand into foreign markets

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