Evans Alison and Chris Surran
The value of the US dollar can greatly influence the amount of imports and exports that flow in and out of the United States. A strong US dollar means that one US dollar typically has more value than one unit of a foreign country’s currency. When this is the case, foreign countries don’t tend to purchase as many US goods because they are more expensive relative to their domestic goods. Not only do exports decrease, but imports increase because it becomes cheaper to buy foreign goods. This phenomena causes US GDP to fall. On the other hand, when the US dollar is weak it’s value per unit is lower than the normal value per unit of another country’s currency. When this is the case, the US is less likely to import goods because they are more expensive than domestic goods. Also, a weak US dollar attracts foreign traders because US goods are less expensive than other countries’ goods. In this case, imports should decrease and exports should rise.
Since the Great Recession, the Trade Weighted U.S. Dollar Index, which is calculated against the United State’s main trading partners, has gradually risen. As the value of the dollar has risen, total net exports (exports – imports) has fallen, proving the theory stated above to be true. The strength of the US dollar has deterred foreign countries’ interest in importing US goods. What would be a good way to weaken the US dollar to increase net exports and US GDP? Is there a better way to do this without having to weaken the US dollar?