Economics Homework: Analysis of the US Dollar's Reserve Status

This economics assignment examines the US dollar's status as the world's reserve currency, exploring its benefits and drawbacks. The research highlights how the strong US dollar influences international trade, exchange rates, and the balance of payments. It discusses the advantages, such as the ability of foreign central banks to hold the currency and facilitate international trade and investment. However, it also analyzes the negative impacts, including reduced exports, increased imports, and the effects on the tourism sector. The assignment further includes responses to classmates, providing different perspectives on the topic and the implications of a strong dollar. The student references relevant academic sources to support their arguments.

Economics
3 / 2 4 / 2 0 2 0

Economics 1
Contents
Primary task response......................................................................................................................2
Responses to other students.............................................................................................................3
References........................................................................................................................................4

Economics 2
Primary task response
In the research, this has been found US dollar remains the world’s reserve currency. The decline
in the supply of making by making the dollars as more expensive to borrow has allowed the
government to hold the power exchanges which shows the benefits of the US as a world reserve
currency. It has been found that benefit is the company will be able to hold the currency of the
foreign central banks. Another benefit of the US as a reserve currency has used the dollar for
investment as well as international trade (Cohen, 2018). In this trade, US imports and borrows in
dollars and it is less exposed to the exchange rate that brings the change in the value of the
external liabilities and imports that facilitating the ability to borrow the amount across the world.
Most of people usually think that a strong dollar is good for the country as it helps US consumer
because it makes them purchase foreign goods to enjoy the buying cheaper. However, it hurts the
US exports and leads to the impact on the employment and production of US. Along with this,
strong US dollars make the United States a less affordable travel destination for foreign visitors
(Kirchner, 2019). The less foreign visits by the people will bring the decline in the economy in
the tourism sector and the country will not be able to spread awareness about the history and
culture of their country. Thus, this lack of awareness and high dollar affects the people to the
most.
In the present scenario, the presence of the strong US dollar hurts its balance of payment and the
reason behind this is that most of the countries from which the US trades with have weak
currency while comparing it to the US dollars. Thus, this affects the US to the most as their
exports reduce and rise in the imports which lead to impact on businesses. For the business in the
US, a strong currency is not considered as advantages as their products become less competitive

Economics 3
in the international market due to the presence of the advanced charges (Costigan & Cottle,
2018). Therefore, the improvement in the imports and a decline in the exports make the balance
of payment to suffer.
Responses to other students
First classmates: - Yes, I agree with the peer findings as they presented the same similar opinion
about the world’s reserve currency in the U.S. Along with this, the businesses will get the benefit
or might hurt the U.S. balance of payments. There are similarities within the class discussion as
it includes the relationship of US reserve currency and exports or imports of the product. The
ideas that stand out include examples that support the example.
Second classmates: - No, I disagree with the peer findings as the findings show a lot of
differences which doesn’t include much of the side that hurts the UK economy but rather it
includes the benefits of a strong dollar. The differences in the discussion are that my discussion
includes the effect on the economy due to the lack of tourist visits within the country. However,
the idea that stands out includes the benefits to the companies due to US dollars.

Economics 4
References
Cohen, B. J. (2018). Currency power: Understanding monetary rivalry. Princeton University
Press.
Costigan, T., & Cottle, D. (2018). The US dollar and its challenges: American hegemony in the
21st century. Journal of Labor and Society, 21(2), 159-172.
Kirchner, S. (2019). The ‘Reserve Currency’ Myth: The Us Dollar’s Current And Future Role In
The World Economy. Retrieved from: https://www.ussc.edu.au/analysis/the-reserve-
currency-myth-the-us-dollars-current-and-future-role-in-the-world-economy