Question

Given the quantitative easing measures put into place by the Federal Reserve, what do you believe will be the impact on the value of the US dollar and how will this increase or decrease a U.S. company’s ability to sell their goods or services abroad?

Answer 1

Answer:

• Dollar will decrease in value
• Increase the ability to sell abroad

Explanation:

Quantitative easing is an expansionary policy where instead of buying short term securities in the market, the central bank (Fed) buys longer term securities. This will put more money into the economy as well as reduce interest rates due to the increased demand for the securities that the central bank creates.

With an increased supply of dollars relative to demand in the economy, the value of dollars will fall in value.

This is good for a U.S. based company as their goods will now become cheaper as they are denominated in dollars. As their goods ae cheaper, they will sell more goods abroad.