Question

Briefly describe how an appreciation of the U.S. dollar affects each of the following people: (Please answer for all 4!)

1. Boeing aircraft manufacturer (one of the largest U.S. exporters)

2. An American company who has heavily borrowed from abroad

3. An American who is making an extensive trip abroad

4. The United Auto Workers Union (UAW) representing auto workers of North America.

Answer 1

(1)

Appreciation of dollar will make exportable goods less competitive in global market, so export demand for Boeing will decrease, lowering its revenue and profits, ceteris paribus.

(2)

Appreciation of dollar will make the company pay the debt service in foreign currency using less number of dollars, which will benefit the American company by lowering its dollar value of debt service.

(3)

The American making a trip abroad has to spend less number of dollars to buy foreign currency when dollar appreciates, so the American will benefit.

(4)

Appreciation of dollar will lower exports of automobile, which will lower the demand for auto workers, reducing their wage. So UAW will lose their bargaining position and will be harmed.