Question

The US dollar goes from $1 = 0.98 Euro to $1 = 1.04 Euro, which of these is true?

O Both the dollar and the Euro are becoming stronger
O The Euro is becoming stronger
O The US dollar is becoming stronger
O The US dollar is becoming weaker

Answer 1

The correct statement is that the US dollar is becoming stronger. The strength of the US dollar impacts trade balance and the competitiveness of exports.

Step-by-step explanation:

When the US dollar goes from $1 = 0.98 euro to $1 = 1.04 euro, it means that the US dollar is becoming stronger and you need more euros to buy one US dollar. Conclusively, the euro is becoming weaker in this scenario. The strength of a currency is linked with its purchasing power relative to other currencies; thus, an increase from 0.98 to 1.04 indicates a greater purchasing power of the US dollar in the European market.

The issue of whether a stronger dollar is good for the US economy is complex. A stronger dollar can reduce the cost of imports, benefiting US consumers who buy foreign goods. However, it can also make US exports less competitive on the global market, as seen in situations where trade deficits have widened when the dollar strengthened versus the euro.