Which is the biggest economy?

Which is the biggest economy?
Is it the USA? Yes, if you look at the numbers.
How do you look at the numbers? We denominate these numbers in some currency, dollar in this example. So, we say China is smaller than the USA because in dollar terms china produces less than the USA.
Now what happens if Chinese currency appreciates by 200% against US dollar?
Simple, China will be the biggest economy in the world at least for some period (because if exports start to fall due to currency appreciation then China will not expand much).
What if EURO appreciates 100% against the dollar?
Simple, EURO ZONE economies will be bigger than the USA.
The dollar cannot fall much as of today, for the reason that oil is priced in the dollar. If the dollar falls the oil rises. This in turn exports inflation to all emerging economies as they have to pay in dollars to buy oil.
Do you see how valuation of a currency can play havoc?

-Shrihas Pandharkar,

DYOR.

© Copyright. No reproduction, please.