Exchange rate is of course important. It may be necessary. Also, at times it may not be that necessary. In short run it of course is necessary. But in the long-run, not so much. In the short-run if the dollar falls below the exchange rate. Then of course few changes are obvious.
The U.S exports gains the competition. And of course the imports become costly. This is apparently why the cost of the imported export goods must be high. This will definitely help in increasing saving. Also, it will help deplete the consumption expenditure of course.
Nothing else is affected. The private sector is also impacted. The investment is decreased or the savings increase. This depletes private sector deficit. Also it reduces the current account deficit.
Links of Previous Main Topic:-
- Definition of Economics
- Economic Problem
- Market Equilibrium
- Employment and Unemployment
- Measuring GDP and Economic Growth
- Economic Growth Macroeconomics
- The Exchange Rate and the Balance of Payments
- The Foreign Exchange Market
Links of Next Macroeconomics Topics:-