|INSTRUCTOR DISCUSSION NOTES:
Future Bright For U.S. Exports?
1. Briefly discuss how a weaker dollar will improve the U.S. trade gap.
When the dollar is weaker against foreign currencies it takes less of the foreign currency to buy a dollar on the foreign exchange market. This translates to cheaper prices on United States goods and services. Itís just the old law of demand, people, foreigners in this case, will buy more at lower prices. The end result is an increase in American exports and a decline in the deficit, ceteris paribus.
2. How will improved and growing foreign economies aid the U.S. in reducing its trade deficit?
When economies are growing, more workers have jobs, many workers have improved wages, businesses are likely to spend more, and general economic activity increases. In a global economy some of this new found abundance is manifest by purchases from other countries such as the U.S. In other words, strong economic growth in foreign countries translates into increased demand for American goods and services. As America is able to sell more to these prospering countries the difference between imports and exports can be expected to decline.
©2007 South-Western. All Rights Reserved webmaster | DISCLAIMER