Discussion VII

Can you please help with this discussion question response to my post? This was the question to the post (Suppose that the value of U.S. dollar went up recently relatively to other foreign currencies. Discuss what might have caused this. Discuss this using relevant economic concept and theory (Minimum words count: 150 words)

My post:

Currency values fluctuate due to many reasons; the United States Dollar due its supply and demand can cause it to rise against other currencies. Due to strong economic recovery, the rate of unemployment reduces due to economic growth, making the interest rates go up (Carbaugh, 2013). By increasing the interest rates in comparison to other countries, more demand will increase for the US dollar as investors will look invest in the dollar. The value of the currency of a country is also dependent on its political condition if the country’s political scene is unrest, investment opportunities reduce and interest rates also go down (Pettinger, 2016). The US having a strong history in stable politics makes it suitable for investment and therefore increases its economic stability hence increase in interest rates which causes the dollar to rise (Carbaugh, 2013). Additionally, weakening of the Euro is one of the major causes of rising of the dollar since its one of its main competitors.

References

Carbaugh, R.J. (2009). International Economics. 12th Edition. Cengage Learning.

Pettinger, S. (2016). Reasons for rise in value of the dollar. Economics Help. Retrieved on January 25, 2018,

Classmate Response to my post:

You mentioned that the United States has a history of having a stable economy due to our stable politics. We proved that theory wrong when our economy and dollar value went down in 2008-2009. Remember when we dipped into a reccession. Other foreign countries had to step back and see if we could get out of it. It’s taking us time but we are doing it. This is putting the dollar value stronger than ever for us. We are still vulnerable to great set backs as well.


Professor Response to my post:

Great post! I also wonder if you could provide discussions on a recent economic event showing how foreign investment affects the relative value of the U.S. dollar. Can you provide further discussions on that?

Prof. Yoo

 

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