Question

a strong dollar places pressure on inflation, which in turn places pressure on the dollar. a. upward; upward b. downward; upward c. upward; downward d. downward; downward

Answer 1

A strong dollar places downward; pressure on inflation, which in turn places upward pressure on the dollar.

Strong dollar, cheaper imports, and competition drive domestic firms to maintain low pricing, pushing the dollar higher.

What impact does a high dollar have on inflation?

A stronger currency benefits American consumers by keeping import costs in check and bringing inflation down. For instance, European businesses profit more euros on every dollar of sales when the dollar is increasing versus the euro.

Does a high dollar indicate less inflation?

On the plus side, the price of foreign items in the United States is decreased due to the strong dollar. Without it, inflation would be higher here. Thus, a strengthening dollar is consistent with the Federal Reserve's current policy, which aims to reduce inflation.

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