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Strong vs weak dollar

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Given the current condition of the US economy, do you think US policy makers would prefer to see the $ rise in value, decline in value or stay at its current value? Discuss the advantages and disadvantages to the US economy at this time of a stronger vs. a weaker $. Frame your answer in terms of the current Aggregate Demand and Aggregate Supply behavior of the US economy.

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Solution Summary

Whether US policy makers perfer a stronger or weaker dollar.

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A strong dollar makes US goods more expensive relative to imports, while a weak dollar makes them cheaper. If the economy is weak, then policymakers prefer a weak dollar. This stimulates aggregate demand for US manufactured goods both at home and abroad. It encourages ...

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