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Outline two possible economic effects for the Irish Economy of the euro (€) appreciating in value against the US dollar (S) - Leaving Cert Economics - Question 6 - 2014
Question 6
Outline two possible economic effects for the Irish Economy of the euro (€) appreciating in value against the US dollar (S). (i) (ii)
Worked Solution & Example Answer:Outline two possible economic effects for the Irish Economy of the euro (€) appreciating in value against the US dollar (S) - Leaving Cert Economics - Question 6 - 2014
Step 1
(i) Import prices are cheaper
Answer
As the euro appreciates against the US dollar, the price of imports from the US is likely to decrease. This creates a situation where Irish consumers can buy US goods at a lower cost, resulting in a diminished import bill for Irish producers. Consequently, imports from the US will increase, benefiting consumers but potentially harming local producers who may find it difficult to compete with cheaper US goods.
Step 2
(ii) Export Prices Dearer
Answer
The appreciation of the euro makes Irish exports relatively more expensive for US consumers. As a result, exports from Ireland to the US are likely to decrease, making them less competitive in the US market. This shift may lead to reduced sales for Irish businesses reliant on the US market, affecting their profitability and potentially leading to lower employment levels in those sectors.