Big Boost from Dollar Decline
In the article, Big Boost from Dollar Decline, it indicates that the U.S. economy may experience a boost in growth from the dollar's decline in value. Bernanke signaled that the Central Bank was going to pump more dollars into the economy and the dollar fell by 4.8%. With this devaluation the trade deficit will decrease, which is an equivalent of 0.5 percentage point of growth each year. Applied in context in a real-life example, one could say that the U.S. needs to import less and that China needs to import more. When one country purposely devalues its currency then other countries want to do the same. Some countries do not like it when another country purposely depreciates its currency. China has warned the U.S. not to depreciate its dollar. I find this interesting because China does the same thing with its currency. When a country pursues this strategy it makes that nation's exports cheaper to other countries and other nations' imports more expensive to the devaluing country. Economic growth results from this principle, due in large part, because countries are spending less on expensive imports and are busy producing large quantities of exports that are bought by other nations. It makes sense for China to purposely devalue its own currency because it is known world-wide for its enormous volume of exports. MADE IN CHINA is a phrase that most Americans have seen for a long time on the products they buy.