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Outline two possible economic effects for the Irish Economy of the euro (€) appreciating in value against the US dollar ($) - Leaving Cert Economics - Question 6 - 2014
Question 6
Outline two possible economic effects for the Irish Economy of the euro (€) appreciating in value against the US dollar ($). (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 ($) - Leaving Cert Economics - Question 6 - 2014
Step 1
(i) Import Prices are Cheaper
Answer
As the euro appreciates against the US dollar, the cost of imports from the US decreases. This means that Irish consumers and businesses will face lower prices for imported goods, which can lead to a reduction in the overall import bill for Irish producers. Consequently, this may increase the demand for US products in Ireland.
Step 2
(ii) Export Prices Dearer
Answer
Conversely, the appreciation of the euro makes Irish exports more expensive for US buyers. This could lead to a decrease in the competitiveness of Irish goods in the US market, potentially resulting in reduced sales and revenue for Irish exporters. With fewer exports, industries relying on US markets may suffer and experience declines in employment.