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Discussion Forum 5 - Discussion Forum 5 Consider the...

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Discussion Forum 5 Consider the drawbacks of a weak dollar. A weak dollar is usually caused by two important factors: The U.S. trade deficit and the U.S. budget deficit. When the dollar is weak, it means that goods bought overseas will cost more in U.S. dollars. Another drawback of the weak dollar is the necessity to keep interest rates higher than normal on government securities to attract foreign investors. What does it mean for companies that depend on imported raw materials? Companies that purchase parts and raw materials from abroad will see an increase in the prices they pay (if paid in U.S. dollars). How does the weak dollar affect American consumers? Increased production costs for products made in the U.S. with imported materials will cause the prices of those products to also increase. This means American consumers will pay more for goods. This may also lead to a loss of jobs because companies looking to save money in other areas may look towards outsourcing as a viable money saving alternative.
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