ECONOMICS
Looking for help on economics ECN215 discussion post/ 2 paragraphs
Countries, such as the United States, have expressed concern that China artificially devalues its currency. The concern is the devaluation puts an automatic discount on Chinese-produced goods, giving Chinese producers an advantage in international markets.
- Evaluate the effect an artificially low exchange rate has on both China and the countries it trades with.
- Discuss the benefits to a country of having a strong currency.
Answer previewEconomics
Many countries including the United States have raised concerns over China’s devalued currency. The devaluation practices have increased currency war among trading partners because that it has on trading partners. According to Xu (2008), the artificially low exchange rate has a positive impact on China whereby the country gains price competitiveness for its exports. The increased competitiveness boosts economic growth in China, and this contributes to improved living standards for the citizens. However, for countries that China trades with such as America, Thailand and European Union, the low exchange rates have adverse effects on their domestic markets. In this case, these countries are forced to lower the price of their products to compete with China’s low-price commodities. This affects the profitability…
(300 words)