There are actually major advantages of a strong dollar, but it is hard to tell whether a strong dollar would bring many benefits than the otherwise. One of the common benefits is for Americans traveling abroad. With a strong dollar they have buying power overseas. This is because the local prices have nothing to do with the changes in the U.S. economy. Moreover, Americans would get major benefit once they convert dollars to foreign currencies. On the other hand, Americans living and working overseas would experience the opposite.
Americans working and living overseas would experience a decrease in cost of living since they are paid with foreign currencies. They would compare and contrast the money they received if it had been dollar or otherwise. The next benefit is cheaper exports.When the manufacturer’s currency is lower than the U.S. dollar, it means that any imported goods to the U.S. would be cheaper. So, the simple example would be European cars like BMW, Porsche, Mercedes, and Ferrari would jump in dollar price if the dollar is strong. The calculation is if the European car price is €70.000 with 1.35 dollars exchange rate, it will costs $94.500. The same car selling for the same euros amount will be priced $78.400 if the exchange falls to 1.12 dollars per euro.
This is to conclude that if the dollar is stronger, the import price will continue to fall. In addition, other lower-cost imports would also decrease in price leading to a more disposable income for the American consumers. Disposable income is the total money an individual or household is spending or saving after the deducted income taxes.
