Question

10. US-based company, Microsoft, has launched a new video gaming console product called M-box and is deciding to export to Canada. Given the current situation for COVID-19 pandemic, US dollar appreciated compared to CAN dollar (the rate jumped from 1.3 CAN/US to 1.4 CAN/US). Please analyze the effect of the change of exchange rate on: a) Export of the US Answer: b) Economy and GDP of the US Answer:

Answer 1

A - Export of US - Since as per the given condition , the US dollar has appreciated in comparison to the canadian dollar , this means that the US products will be expensive for Canada now. It is less predictable that expensive good will be purchased . Thus , with the appreciation of US dollar , the Exports of US will decline.

B - With the decline in the exports , there will be the decline in the value of the net exports and this will decrease the value of GDP os US.

The decline in US GDP will have a negative impact on the economic growth.