What is meant by Dollar weakning?
And
What is that meant when goverment announce that it increase or decrease the interest rate? Is it good for the public or what? what are the affect of increase/decrease the interest rate?
Answer:
a weakening dollar is when the exchange rate compared to other currencys is decreasing...(you get less for your buck)
it can be both good and bad that the dollar is weakning... some of the benefits of it would be...in the short term it could me lowering the trade defecit...it could eventually boost job growth.
it would offer up more jobs in the US and the manufacturing would increase so the price of goods/services would drop and then the demand would go up for US goods.
the bad thing about a weak dollar is it would probably lead to inflation. it would make it more expensive for US consumers to afford things imported from areas like europe and asia bc they would be 2 of the main places to be affected by the dollar weakening.
when the government accnounces a increase/decrease in interest rate it can be good or bad. it depends what you want to do and what part you play in the country. it could be good for business's but bad for individuals who are looking at purchasing something
an interest rate is basically the price for borrowing money. and they go up/down based on many factors. like inflation and monatary policy. when the interest rate is increased/decreased the rate of demand will increase/decrease depending on the interest rate...for example.
when the interest rate is low more people would like to borrow money to buy houses because it cost less to borrow the money...when the interest rate is higher you will have to pay more to borrow the money.
consumption will fall whenever the interest rate rises and when the interest rate increases consumption will increase
The dollar is weakening if it takes an increased amount of US currency to purchase foreign currency. If a pound sterling costs $2.03 one day and $2.06 the next, the dollar is weakening compared with the pound.
Increasing the prime interest rate causes lenders to increase what they charge for loans. This, in turn, makes it more expensive to buy a home or start a business. On the other hand, raising interest rates reduces inflation, because there is less available money for things like raises and dividends.
The dollar weakening means that its becoming less valuable against other internation currencies. The Dollar may be worth .75 of a Euro today, and worth .70 of a Euro tomorrow- that would be the dollar weakening, or being worth less against the Euro.
Interest rates are the amount that the Federal Reserve loans money to its member banks at. Higher rates by the Fed means that you pay higher rates when you borrow money for a mortgage or to buy a car. Lower rates mean credit is cheaper. Low rates generally stimulate the economy, as they encourage people to buy more (on credit), but can lead to inflation. Higher rates slow spending, but because there is less money in the system (because people are borrowing less to buy less), it then helps to slow/eliminate inflation.
a weaker dollar means a single dollar buys fewer yen, marks, francs, pounds, whatever you are comparing it to. this means a person holding a dollar can buy fewer foreign goods with that dollar, but, it also means US goods are cheaper overseas.
the Fed controls the prime rate which influences the interest rate banks charge on loans. the macro effect of an increase is to slow the economy. they do this to fight inflation. so good or bad is tough to say. if it stops inflation then it is good, if there really wasn't inflation then it just cost people jobs
dollar weakening against other foriegn currencies mean that the price of dollar in terms of other foreign currencies is falling.for example,suppose $1=70taka,now due to change in economic condition $1=60taka.this shows that before a bangladeshi used to pay 70taka to purchase anything worth $1 and now the person would pay less,that is,60taka to get the same good worth $1.this is called dollar weakening.
interest rate is the reward upon saving and a price charged upon borrowing money from financial institutions.
government announcing interest rates cut or rise - the effect depends upon the structure of trade of a particular country with the whole world.
government of a country could cut interest for a number of reason.these could be:
1.to enhance economic activity - cutiing interest rate is likely to reduce saving and encourage consumption.this would increase aggregate demand in the economy thereby creating more production.
2. to increase the level of investment by lowering the cost of capital for entrepreneurs.this also has a multiplier effect.it creates employment therefore more production.
3.interest rates may be cut to weaken local currency against other.rate cut would cause an outflow of hotmoney from country causing the local currency to devalue.this in turn make locally produced goods cheaper in foreign countries thereby encouraging exports.
4.however,if the economy is in boom,such rate cut would also result in inflation destroying value of money and disrupting business plans.
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What is that meant when goverment announce that it increase or decrease the interest rate? Is it good for the public or what? what are the affect of increase/decrease the interest rate?
Answer:
a weakening dollar is when the exchange rate compared to other currencys is decreasing...(you get less for your buck)
it can be both good and bad that the dollar is weakning... some of the benefits of it would be...in the short term it could me lowering the trade defecit...it could eventually boost job growth.
it would offer up more jobs in the US and the manufacturing would increase so the price of goods/services would drop and then the demand would go up for US goods.
the bad thing about a weak dollar is it would probably lead to inflation. it would make it more expensive for US consumers to afford things imported from areas like europe and asia bc they would be 2 of the main places to be affected by the dollar weakening.
when the government accnounces a increase/decrease in interest rate it can be good or bad. it depends what you want to do and what part you play in the country. it could be good for business's but bad for individuals who are looking at purchasing something
an interest rate is basically the price for borrowing money. and they go up/down based on many factors. like inflation and monatary policy. when the interest rate is increased/decreased the rate of demand will increase/decrease depending on the interest rate...for example.
when the interest rate is low more people would like to borrow money to buy houses because it cost less to borrow the money...when the interest rate is higher you will have to pay more to borrow the money.
consumption will fall whenever the interest rate rises and when the interest rate increases consumption will increase
The dollar is weakening if it takes an increased amount of US currency to purchase foreign currency. If a pound sterling costs $2.03 one day and $2.06 the next, the dollar is weakening compared with the pound.
Increasing the prime interest rate causes lenders to increase what they charge for loans. This, in turn, makes it more expensive to buy a home or start a business. On the other hand, raising interest rates reduces inflation, because there is less available money for things like raises and dividends.
The dollar weakening means that its becoming less valuable against other internation currencies. The Dollar may be worth .75 of a Euro today, and worth .70 of a Euro tomorrow- that would be the dollar weakening, or being worth less against the Euro.
Interest rates are the amount that the Federal Reserve loans money to its member banks at. Higher rates by the Fed means that you pay higher rates when you borrow money for a mortgage or to buy a car. Lower rates mean credit is cheaper. Low rates generally stimulate the economy, as they encourage people to buy more (on credit), but can lead to inflation. Higher rates slow spending, but because there is less money in the system (because people are borrowing less to buy less), it then helps to slow/eliminate inflation.
a weaker dollar means a single dollar buys fewer yen, marks, francs, pounds, whatever you are comparing it to. this means a person holding a dollar can buy fewer foreign goods with that dollar, but, it also means US goods are cheaper overseas.
the Fed controls the prime rate which influences the interest rate banks charge on loans. the macro effect of an increase is to slow the economy. they do this to fight inflation. so good or bad is tough to say. if it stops inflation then it is good, if there really wasn't inflation then it just cost people jobs
dollar weakening against other foriegn currencies mean that the price of dollar in terms of other foreign currencies is falling.for example,suppose $1=70taka,now due to change in economic condition $1=60taka.this shows that before a bangladeshi used to pay 70taka to purchase anything worth $1 and now the person would pay less,that is,60taka to get the same good worth $1.this is called dollar weakening.
interest rate is the reward upon saving and a price charged upon borrowing money from financial institutions.
government announcing interest rates cut or rise - the effect depends upon the structure of trade of a particular country with the whole world.
government of a country could cut interest for a number of reason.these could be:
1.to enhance economic activity - cutiing interest rate is likely to reduce saving and encourage consumption.this would increase aggregate demand in the economy thereby creating more production.
2. to increase the level of investment by lowering the cost of capital for entrepreneurs.this also has a multiplier effect.it creates employment therefore more production.
3.interest rates may be cut to weaken local currency against other.rate cut would cause an outflow of hotmoney from country causing the local currency to devalue.this in turn make locally produced goods cheaper in foreign countries thereby encouraging exports.
4.however,if the economy is in boom,such rate cut would also result in inflation destroying value of money and disrupting business plans.
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