economics

posted by .

How do the drop in sales such as a new homes effect the value of the U.S. dollar relative to other currencies?

  • economics -

    Lets start with am international supply and demand for US dollars, expressed in terms of of some foreign currency such as Euros.

    The demand for US dollars comes from foreigners who want to buy US goods. An increase in the demand for US goods would lead to an increase in the demand for dollars. However, I think we can safely assume foreigners don't want to purchase new homes in the US.

    One source supply of dollars comes from investors (foreign and domestic) who are looking for some return on their money. One source of investment is financing new homes purchases.

    Now then, if new home sales falls, then the financing of new homes must also fall. Investers, looking for alternative investments, sell dollars for Euros. So, the supply of dollars increases. Which means the price of dollars in terms of Euros falls. Soooooo, I would assert that a drop in new home sales in the US would cause the value of the US dollar to drop.

    Whew. I hope this helps.

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Economics

    What does it mean when one currency is falling against another currency?
  2. social science

    What should America Federal Reserve do to preserve the value of the U.S. dollar when there is a situation as a drop in new home sales,with the rise in unsold new property, and a drop in consumers buying goods and services?
  3. economics

    If a country such as Europe sells their saved dollars as a result in a drop in U.S. sales and purchases, will the demand-supply graph show only the demand for the dollar. I just don't understand what the demand-supply graph suppose …
  4. economics

    An increase in the value of the U.S. dollar relative to foreign currencies would lead to A) an increase in U.S. exports and a decrease in U.S. imports B) a decrease in U.S. exports and an increase in U.S. imports C) an increase in …
  5. finance

    Winnebagel Corp. currently sells 29,400 motor homes per year at $44,100 each, and 11,760 luxury motor coaches per year at $83,300 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to …
  6. Statistics

    In 2002, the average price of new homes in a certain suburb was $145,000. Assume that this mean is based on a random sample of 1000 new home sales and that the sample standard deviation is $24,000. Construct a 95% confidence interval …
  7. economics

    f the US dollar depreciates dramatically relative to the Chinese yuan, what effect would this have on consumers and businesses in each country?
  8. managerial economics

    Cypress River Landscape Supply is a large wholesale supplier of landscaping materials in Georgia. Cypress River’s sales vary seasonally; sales tend to be higher in the spring months than in other months. a. Suppose Cypress River …
  9. Math

    The relative value of currencies fluctuates every day. When this problem was written, one Netherland Antillean Guilder (Used on the Caribbean island of CuraÇao) was worth .558659 US dollar. a. Find a function that gives the U.S. dollar …
  10. Statistics

    In 2015, the average price of new homes in a certain suburb was $145,000. Assume that this mean is based on a random sample of 1000 new home sales and that the sample standard deviation is $24,000. Construct a 99% confidence interval …

More Similar Questions