Maybe a Weak Dollar is not so Bad
Topic
International Trade
Key
Words
Weak Dollar, Trade Deficit, and Economic Growth
Full
Article
If you have an InfoTrac or BCRC access code, click on the appropriate source to
login and view the full text article.
Reference ID: A163322500
News
Story
Over half of the 9.1 million vehicles produced by General Motors last year were
sole in foreign countries. This is a growing trend for American business firms.
With the slump in the housing market companies like Caterpillar are seeing a fall
in domestic sales and will be counting on sales of equipment and diesel engines in
Europe, Asia and the Middle East to keep growing.
All of these sales are being helped by a weak dollar that makes American goods
and services more competitive in foreign markets. Rather than hurting American
companies, the weak dollar is actually providing a strong demand for many
American goods.
American importers who buy from overseas are hurt by the weak dollar and
American travelers in foreign countries have a less valuable currency in their
wallet – but overall those negatives are being offset by strong export sales.
“The old notion that if the dollar’s bad, corporate profits have to go down is no
longer correct,” said Howard Silverlatt, a senior analyst at Standard & Poor’s.
“There’s a lot of growth going on in the rest of the world, and companies have to
be there if they want to participate. There’s a lot to be sold.”
With an apparent shift to an export-driven economy more jobs will be created at
home to keep up with the new demand. Fast growing economies in Europe are
creating demand for more and more products and the weak dollar is making United
States produced goods more attractive and encouraging American producers to
keep more production at home and sell more goods abroad.
“Home-grown demand is being fed by home-grown production instead of foreign
production,” said Chris Varvares, the president of Macroeconomic Advisors, an
economic research firm in St. Louis. “That requires more domestic employment,
and that’s better for the domestic economy.”
Questions
Discussion Questions:
1. Explain why the weak dollar makes American goods more competitive in
foreign markets.
2. Explain why the weak dollar encourages American producers to keep more
production at home and create more jobs in the U.S.
Multiple Choice/True False Questions:
1. A weak dollar makes foreign goods more expensive to American buyers.
a. True
b. False
2. As U.S. exports increase it should create more jobs in the U.S.
a. True
b. False
Source
Jeremy Peters, “Rising Exports Putting Dent in Trade Gap,” The New York Times Online, May 14,
2007.