Weak Dollar Encourages Exports, While a Strong

¶ … weak dollar encourages exports, while a strong dollar encourages foreign imports into the United States. The explanation in this case is rather simple. Imports need to be paid in the currency of the country wherefrom they have originated. This means that the American importer needs to purchase the foreign currency in order to pay the import.

If the dollar is strong, then the fixed amount of foreign currency that needs to be purchased for the imports can be purchased with less American dollars, in the sense that less American currency needs to be exchanged to reach the fixed import sum. A practical case refers to an import from the European Union. A strong dollar favors a cheaper import.

On the other hand, a weak dollar favors exports from the U.S., because the American producers need to pay comparatively less than their counterparts and their products are internationally sold against stronger currencies. On the other hand, a strong or weak dollar has a direct impact on interest rates and inflations, just as these have a direct impact on the currency. As such, a strong dollar that favors cheap imports will most likely trigger inflationary waves, because the demand for cheaper products is likely to grow.

An inflationary period will argue for an intervention of the Federal Reserve, rising interest rates so that the propensity to spend will decline and people will resume a saving tendency. A strong dollar is thus associated with the risk of an inflationary period and an intervention from the Federal Reserve rising interest rates. It is worthy to note that a macroeconomic instability that involves growing inflation will trigger an increase in interest rates. Due to the difference in interest rates, the foreign investors will likely pick the U.S.

dollar as the currency offering the best return in a given case. 2. At first glance, we may decide that the Funeral Home, due to its specificity, is not likely to engage in any international trade. On the other hand, it is important to classify the company's activity in two separate domains: demand and supply. In terms of demand, we need to admit that this needs to come locally, from at most several hundred kilometers.

Certainly, we may consider using cooling vans to transport the bodies, but we also need to appreciate whether or not the activity remains rentable in this case, due to increased costs. On the other hand, the supply side offers numerous opportunities for international trade. The global world we live in today and the facility with which we communicate with one other, no matter what the distance, implies that the company may provide its supplies from all over the world.

International trade will intervene in cases such as buying certain substances which are found cheaper on the international markets rather than in the U.S., but also producing cheaper coffins somewhere where there is an abundance of wood or metal, for example. This includes, in my opinion, the workforce supply and the discussion obviously refers here to outsourcing and using cheaper workforce as well. "Importing" workforce may be one of the best solutions to remain competitive on any market.

Outsourcing to other countries has, first of all, a direct impact on the economies of the host countries. New workplaces founded will most likely increase national GDP, which will mean that the country will produce more and, hence, it will also export more. In my opinion, such a move on the national market will reduce prices on the international markets, because of a growing supply. This will probably influence the family owned Funeral Home because it will be able to purchase from the international market at cheaper prices. 3.

Theoreticians do in general favor free trade. The main reason for this could be expressed quite simply. Free trade allows for goods and services to move around without adding the extra custom tax and without needing to deal with the numerous non-tariff barriers that often occur between countries (I am.