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In general, an increasing dollar does not have effects on the real price of domestic goods, but decreases the real price of imports. Because that is no change a
by pyromine 10y ago
In general, an increasing dollar does not have effects on the real price of domestic goods, but decreases the real price of imports. Because that is no change and increased purchasing, it results in a real increase in purchasing power which is therefore an increase in real wages. You can buy a larger basket of goods because the imports cost less.
- throwaway40483 10y agoA strong dollar also reduces export, so how does this pan out net-net?
- pyromine 10y agoJust saw this, but American consumers are more sensitive to import prices than export, because consumers generally do not directly receive the proceeds of exports. Net-net, it'd be hard to say what happens long term in the economy because that has a lot to do with long-term changes in the macro environment, if economic growth remains strong consumers will continue to make out better, if the strong dollar ultimate hurts the economy (and that isn't impossible), a weakening economy hurts consumers more than the stronger dollar.