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Part 1 - Check Your Understanding - Assume that the only two currencies in the world are the U.S. dollar and the euro and that
Part 1 - Check Your Understanding - Assume that the only two currencies in the world are the U.S. dollar and the euro and that the US dollar has recently appreciated. 1. What will happen to US net exports? Explain. 2. Identify who likely benefits from a stronger dollar. 3. Identify who is likely harmed by a stronger dollar. Part 2 - Practice - Fill out the chart and identify if the following will 1 (increase) or | (decrease). US US Change European European exports imports exports imports 4. The euro depreciates 5. The dollar depreciates 6. The euro appreciates. 7 . The dollar appreciates Part 3 - Stretch Your Thinking - Imagine that you are an economic advisor of President Knotbright. Correct his misunderstandings and provide him sound economic advice. 8. President Knotbright is appalled that $1 US dollar only buys E0.9 euros. He tells the public that Europeans are taking advantage of Americans since everything in Europe is 10% cheaper. 9. President Knotbright tells you, "I think we should have both a strong U.S. dollar and more U.S. exports." 10. President Knotbright tells the public, "Every American is harmed when China devalues their currency." 11. President Knotbright claims that placing tariffs on foreign imports will increase the amount the US exports
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