Why do exchange rates cause Americans to pay more abroad? Why are goods and services not priced at 10% less if the currency is worth more 10% more?

Very, VERY broadly, goods and prices around the world are not pegged to US currency. Neither are currencies around the world.

The cost of goods and services is relatively stable, and may not vary year to year, or even decade to decade. Exchange rates change as fast as the stock market computers can keep up with them.

The hotel room in Berlin that cost you €100 in 2014 will still cost about €100 – but today, the dollar is worth less against the Euro than in 2014. But if you’re working in dollars only, you’ll feel ripped off: $70 in 2014, $90 today.

NB: the dollar is ‘strong’ compared to the Euro. It’s just not as strong as it was – i.e., it’s ‘weaker’ than it used to be. But it’s still ‘strong’ in comparison.



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