Econ 102 Final Paper - Hyun Choe 81 82 83

Econ 102 Final Paper - Hyun Choe 81 82 83 - TA: HYUN CHOE...

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TA : HYUN CHOE Sections : 81, 82, 83 Weak dollar 101 Currency worries Fed, affects everything from mortgage rates to retail prices to jobs. Here's how. November 19, 2004: 1:48 PM EST By Chris Isidore , CNN/Money senior writer NEW YORK (CNN/Money) - For most Americans, a record low for the dollar doesn't have the same urgency as soaring oil prices or a big tumble in the stock market. But the dollar is important to economists and policy-makers. Fed Chairman Alan Greenspan, for example, warned in a speech in Europe Friday that two of the things weakening the dollar -- the trade deficit and the budget deficit -- should not be allowed to fester too long. But even the Fed has relatively few tools at its disposal to address either deficit directly. In fact, the value of the dollar has a big effect on almost everything in American life, from the price of consumer electronics to mortgage rates to the job market. And it has a big impact on whether a vacation overseas is more affordable for Americans or Europeans. The causes of the weak dollar are many, but economists agree on some major factors. And the general consensus is that the dollar won't strengthen that much in the foreseeable future. What causes weakness The two factors most often cited are those mentioned by Fed Chairman Greenspan -- the twin deficits. The United States has run a trade deficit with the rest of the world for many years. And it has funded deficits in the federal budget by selling ever growing amounts of debt, a large
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Econ 102 Final Paper - Hyun Choe 81 82 83 - TA: HYUN CHOE...

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