Currency Depreciation Essay Example | Topics and Well Written Essays - 500 words

Currency Depreciation - Essay ExampleDollar would be worth less relative to other world currencies. Thus, conduct for U.S. goods in the international market would increase, and demand for foreign goods in the U.S. would decrease. Thereby, benefiting the balance of payments and improving the U.S. trade imbalance. In wake of losing comparative advantage with the U.S. in terms of exchange rate, other countries can protect their local firms through protectionist policies, higher tariffs, and duties etc. This would tiller U.S. goods expensive for foreign consumers and equate the depreciating dollar advantage of the U.S.Furthermore, the U.S. economy can benefit a lot if depreciation in dollar helps to increase exports and decrease imports. An increase in exports could stimulate demands and kick upstairs firms to hire more people. This would be a good sign for the U.S. economy which is facing an unemployment rate of virtually 10%. Furthermore, the U.S. companies would get more revenue f rom selling abroad, and thus, would be obliged to pay more taxes to the government.However, a depreciated dollar can have negative consequences both for itself and the world. Oil is traded in U.S. Dollars on the international market, and anoint and dollar share an indirect relationship. That is a rise in dollar value decreases the price of oil, whereas a fall in the U.S. Dollar increases the price of oil.