Question

the chinese government is alleged to keep its currency value low to help its exports. similar charges have been made about the japanese government. even the u.s. government is said to have allowed the dollar to depreciate to help the nation's balance of payments to notice the rising prices of gold, oil, and other commodities. what are your thoughts of these issues?

Answer 1

Countries have been known to manipulate their currency's value to gain a competitive edge in international trade, affecting the exchange rate and trade balance. Historical and potential contemporary examples include China, Japan, and the U.S. Such practices can lead to international economic tensions.

Step-by-step explanation:

The allegation that the Chinese government keeps its currency value low to boost exports is an example of a country engaging in competitive devaluation to gain a trade advantage. This practice is also referred to as 'currency manipulation.' Similarly, there have been claims that the Japanese government has followed suit. A historical instance of this is when President Nixon allowed the U.S. dollar to float against the price of gold in 1971, leading to a depreciation and a boost in U.S. exports. Moreover, the demand for a country's goods inherently creates demand for that country's currency, affecting the exchange rate.

A change in the exchange rate can affect a nation's trade balance. For instance, a depreciating currency can make exports more competitive, while an appreciating currency can benefit importers. Governments can manipulate exchange rates by intervening in currency markets, adjusting interest rates, or altering the amount of money in circulation.

It's important to note that these actions can lead to international tension, as they may be seen as giving the manipulating country an unfair advantage in trade.