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"The Euro (€) is hitting a four and a half year low against the US $ - Leaving Cert Economics - Question 8 - 2015
Question 8
"The Euro (€) is hitting a four and a half year low against the US $. (Report: The Irish Independent, January 2015) Explain what the above statement means. (b) Out... show full transcript
Worked Solution & Example Answer:"The Euro (€) is hitting a four and a half year low against the US $ - Leaving Cert Economics - Question 8 - 2015
Step 1
Explain what the above statement means.
Answer
The statement indicates that the value of the Euro (€) has decreased significantly in relation to the United States dollar (US $) over the past four and a half years. This decline means that it takes more Euros to purchase one US dollar than it did four and a half years ago, implying a drop in the Euro's purchasing power relative to the dollar.
This depreciation of the Euro may have various implications for international trade, tourism, and investment. For instance, it can make Irish exports cheaper and more competitive in the US market, potentially increasing demand for these goods. Conversely, imports from the US may become more expensive for Irish consumers and businesses.
Step 2
Outline two possible economic effects of this development for the Irish economy:
Answer
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Increased Competitiveness for Irish Exports: The lower value of the Euro means that Irish goods and services become relatively cheaper for American consumers. This can boost Irish exports to the US, as products will be more attractively priced compared to their competitors in other countries, leading to increased sales and potentially more jobs in export-oriented industries.
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Higher Costs for Imports from the US: As the Euro's value declines, imports from the US will become more expensive. This increase in import costs can lead to higher prices for consumers and reduced profit margins for Irish businesses that rely on American goods. Companies may find it challenging to pass these costs onto consumers, impacting overall economic activity.