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You are watching a national news broadcast with your parents. The news anchor describes that the exchange rate for the dollar just hit its highest value in a decade (High meaning the dollar is worth more in terms of other currencies). The on-the-spot report shifts to a spokesman for Caterpillar, a heavy equipment manufacturer. The spokesman reports that sales of their earthmoving equipment have hit an all-time low and so has the value of their stock. Your parents are shocked by the report's negative view of the high value of the dollar. They just booked their European vacation because of the dollar's high value.

a) Why do Caterpillar and your parents have different opinions about the value of the dollar?

b) Caterpillar imports many parts and raw materials for their manufacturing processes, and they sell many finished products abroad. Since they are not happy about a strong dollar, what must be true about the proportions of Caterpillar's exports and imports?

c) If someone argues that a strong dollar is "good for America" because Americans are able to exchange some of their GDP for a greater amount of foreign GDP, is it true that a strong dollar is good for every American? Why or why not?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M947194

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