The exchange rate is the key relative price for an economy open to international trade and finance. The price Americans pay for Japanese automobiles imported into the United States depends on how many dollars it takes to buy 100 yen, i.e., the dollar/yen exchange rate. The stronger the dollar, the more yen it will buy, and therefore the cheaper the imported cars will be. At the same time, a strong dollar makes it harder for US firms to profitably sell heavy earth-moving equipment like bulldozers (say those made by Caterpillar) to the rest of the world. The strength of the dollar against other currencies also affects other sectors, besides trade in manufactured goods. A strong dollar is good for a US tourist visiting Madrid, but places in the United States that cater to foreign tourists, such as Las Vegas, do better business when the dollar is weak.
Review the options below to login to check your access.
Log in with your Cambridge Higher Education account to check access.
If you believe you should have access to this content, please contact your institutional librarian or consult our FAQ page for further information about accessing our content.