Final answer:
The value of the U.S. dollar against the euro decreased from 2002 to 2008, affecting trade between the U.S. and the EU. This depreciation made U.S. exports more competitive but also increased the trade deficit by making imports more expensive. Evaluating whether this is beneficial or not for the U.S. economy is complex and depends on various economic factors.
Step-by-step explanation:
Impact of a Weaker Dollar on U.S. Trade
From 2002 to 2008, the value of the U.S. dollar declined significantly against the euro, affecting the trade balance between the United States and the European Union. In 2002, the exchange rate was 1.11 euros to one dollar, but by 2008, it dropped to 0.64 euros per dollar. During this period, the trade deficit widened from approximately -85.7 billion dollars to 95.8 billion dollars. A weaker dollar makes U.S. exports cheaper and more competitive abroad, potentially boosting U.S. exports. However, it also makes imports more expensive, which can contribute to a larger trade deficit if the economy relies heavily on imported goods. The question of whether this is good or bad for the U.S. economy can be complex - it depends on various factors including the overall balance of trade, the health of domestic industries, and the state of the global economy.
The impact on the economy also relates to international capital flows. When the U.S. government increases borrowing and European financial investors buy U.S. bonds, this creates a higher demand for U.S. dollars, strengthening the currency. It's a nuanced situation where the effects might be favorable in some sectors while challenging in others.