Question

If the value of the dollar declines relative to the Chinese Yuan, what will happen to the price of Chinese goods sold in US stores? Will people in China be more likely to purchase a US made vehicle? Explain your answers in detail.

Answer 1

If the Us dollar declines relative to the Chinese Yuan then we will call it depreciation of the US dollar and the Chinese yuan will appreciate. This will increase the price of the Chinese goods imported in US. As more US dollar has to be paid to for the same Chinese goods.  

People in China whose currency has appreciated will import more as they will have to pay less to buy the same American goods. They will be importing more and more of the American goods at a cheaper price. The more the Chinese yuan appreciates and more the Dollar depreciates it will become cheaper for the Chinese to buy US goods and US will reduce the import of Chinese goods.