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Chapter 18: Q. 3 (page 495)

When the U.S. dollar depreciates, what happens to exports and imports in the United States?

Short Answer

Expert verified

When the U. S dollar depreciates the exports will increase and imports will fall.

Step by step solution

01

Concept Introduction

Whenever the US dollar devalues, it implies that its worth has diminished compared with different monetary standards.

02

Explanation

On the off chance that the US dollar devalues, unfamiliar merchandise requested by US residents will become costly. Taking illustration of US dollar and euro, prior 1 US dollar could purchase 1 euro worth of products. In any case, presently we want 1.25 dollars to get 1 euro worth of products. So fundamentally it is like the Price of unfamiliar products have expanded.

As per the regulation of interest, when cost increments, the amount requested diminishes.

Accordingly, US residents will request less unfamiliar products. Thus imports will fall.

To foreign residents, in any case, US products have become less expensive. Since prior they used to pay 1 euro for 1 dollar worth of merchandise, yet not they just need to pay 0.8 for a similar sum. Consequently, when costs decline, the amount requested should increment. Accordingly, unfamiliar residents will request a greater amount of US great. Accordingly, commodities will increment.

03

Final Answer 

When the U. S dollar depreciates the exports will increase and imports will fall.

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Most popular questions from this chapter

International travelers and business people frequently need to accurately convert from one currency to another. It is often easy to find the rate needed to convert the U.S. dollar into another currency. It can be more difficult to find exchange rates between two non U.S. currencies. Go to http://www.oanda.com/convert/ classic. This site lets you convert from any currency into any other currency. How many Lithuanian litas can you currently buy with one Chilean peso?

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If the demand for a country鈥檚 exports falls at the same time that tariffs on imports are raised, will the country鈥檚 currency tend to appreciate or depreciate in the long run?

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If nominal interest rates in America rise but real interest rates fall, predict what will happen to the U.S. dollar exchange rate.
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