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if the value of the euro appreciates compared to the dollar, what is logical outcome for us exports to the eu?

2 Answers

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Final answer:

The appreciation of the euro against the dollar would likely lead to a decrease in US exports to EU countries as American goods become more expensive for European consumers.

Step-by-step explanation:

If the value of the euro appreciates compared to the dollar, the logical outcome is that US exports to the European Union (EU) would likely decrease. This is because a stronger euro makes European goods cheaper for US consumers, while at the same time, US goods become more expensive for European consumers. As the euro gains strength against the dollar, it requires fewer euros to buy the same amount of dollars, increasing the cost of US products for those who use the euro. This could lead to a decline in demand for US exports as European consumers may find alternatives that are less expensive locally or from countries with weaker currencies relative to the euro.

Furthermore, as mentioned in one of the scenarios provided, a stronger dollar—or in reverse, a weaker foreign currency—is beneficial for a foreign firm selling in the US because each dollar earned through export sales will convert to more of the exporting firm’s home currency. Hence, a weaker dollar makes US goods cheaper abroad and tends to increase US exports.

User Bardao
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6 votes

Final answer:

A stronger euro compared to the dollar would lead to a decrease in U.S. exports to the EU.

Step-by-step explanation:

A stronger euro compared to the dollar would have a logical outcome of a decrease in U.S. exports to the EU.

When the euro appreciates, it means that it is stronger compared to the dollar. This would make U.S. goods more expensive for European countries to purchase, leading to a decrease in demand for U.S. exports.

For example, if the price of a U.S. product is $10 and the exchange rate is 1 euro = $1, then the price of the product in euros would be 10 euros. However, if the exchange rate becomes 1 euro = $1.5, then the price of the product in euros would increase to 15 euros. This higher price in euros could lead to a decrease in demand from EU consumers.

User Funkwecker
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