Explain the meaning of “strong” currency and “weak” currency. what are the advantages and disadvantages of each?

1 answer:

8 0

Strong currency and weak currency are relative. The terms are used to describe the value and the strength of a currency against other currencies.

When in strong currency, one can purchase more foreign currency and consumer will see lower or cheaper prices on foreign products. It helps to keep the inflation low. However, the disadvantage is most of the increase in spending will be in countries that are in weaker currency as consumer will less spend on local products.

If in weak currency, country’s export gets cheaper resulting to increase in sales that will lead to economic growth. The disadvantage is inflation will go higher and it will become more expensive to pay foreign investors that are priced in foreign currency.

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