Domestic inflation is a likely result of high import prices. The low value of the dollar refers to the exchange rate, so as the dollar falls the price of imports, including oil, gos up; which cause the price of other good to go up,
That is theory, but the average price of imports is up only 2% from a year ago which is less than domestic inflation, so I think it is safe to say that "people" don't really know what is going on.
2007-11-11 06:12:15
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answer #1
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answered by meg 7
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It actually works the other way -- if the dollar is low the price of gasoline and goods will go up. The reason is that it takes more dollars to purchase the raw materials (and imported goods) such as oil.
If the dollar is high, it takes fewer dollars to purchase the same materials and resources, so the end price of the product should be lower.
2007-11-11 06:31:22
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answer #2
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answered by fuzmaniac 2
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Your premise is exactly wrong, Donna. If the dollar is high, that would tend to make imported commodities cheaper, not more expensive. It is the low dollar that threatens to make things more expensive.
But in reality, imports must compete on price with domestic goods; many imports come from countries where the US dollar has in fact NOT lost much if any value; and in any case the US economy is about 85% insulated from imports anyway. The vast, vast majority of costs within the economy are domestic labor, which is priced in US dollars and unaffected by currency exchange.
So as always, inflation is much more influenced by domestic monetary policy than international currency exchange rates.
2007-11-11 06:34:14
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answer #3
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answered by KevinStud99 6
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