UK's Growth and Economic Dynamism Extract 1: Singdollar hits 3-year high against US dollar The Singapore dollar surged to its highest (S$1.31) in three years against the US dollar after United States Treasury Secretary Steven Mnuchin said a weaker US dollar would help trade and benefit the US economy. Mr Mnuchin's remarks echoed what US President Donald Trump had said in January last year about the greenback being "too strong" which would eventually hurt the American economy. Analysts believe that the US dollar may remain subdued in the short term. However, in the longer run, factors such as a stronger US economy, interest rate hikes and tax cuts will lead the dollar to strengthen. Among the data which points to a strengthening US economy is its unemployment rate which is now at a 17-year low of 4.1%. In the coming months, there could be a potential rise in demand for the US dollar, as measures kick in to allow American companies to repatriate overseas earnings at steeply reduced tax rates. Source: TODAY, 25 January 2018 Question (a) With reference to Extract 1 and using an AD/AS diagram, explain how a weaker US dollar can benefit the US economy. [5]