Please give detailed answers and examples.

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If the US was experiencing an appreciating US Dollar, how would this influence trade flow? If you were President of the US, would your focus be on a strong US Dollar or not?

Nov 22nd, 2014

When the United States dollar becomes stronger, then foreign goods and services become cheaper for Americans, while goods and services from the United States will become more expensive for foreigners, causing imports to rise and exports to decline.

A weaker dollar causes the reverse scenario: more expensive imported goods and services decreases imports, while cheaper American goods and services increases exports.

Thus, the trade balance of any country is largely determined by the value of the domestic currency in relation to other currencies. However, when the foreign exchange rate of a currency changes, it takes at least several months before it has any effect on the volume of imports and exports.

Yes, Focus will be on strong US Dollar,
For instance, if the dollar suddenly weakens, the U.S. trade balance will usually worsen for a few months. Immediately after a currency’s value drops, the volume of imports remains about the same, because most import/export orders are taken months in advance, but the prices, which are listed in domestic currency, rise. On the other hand, the value of the domestic exports remains the same, and the difference in values worsens the trade balance until the imports and exports adjust to the new exchange


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Nov 22nd, 2014

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