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Donald owns several hotels in New York, Las Vegas, and other centers of tourist activity. Much of Donald's hotel revenue comes from European...

In the scenario that you have laid out here, Donald’s hotel business will benefit when the dollar depreciates.  You might even say he will make so much money your head will spin.  This is because European tourists will be better able to afford to come and stay in his hotels.


When a European tourist comes to the United States, that tourist has to exchange euros (assuming they are from a country in the euro zone)...

In the scenario that you have laid out here, Donald’s hotel business will benefit when the dollar depreciates.  You might even say he will make so much money your head will spin.  This is because European tourists will be better able to afford to come and stay in his hotels.


When a European tourist comes to the United States, that tourist has to exchange euros (assuming they are from a country in the euro zone) for dollars.  They, in essence, have to buy the dollars that they will use to pay for things while they are in the US.  In the scenario from this question, the dollar depreciates relative to the euro.  What this means is that each dollar is worth fewer euros and, to look at things from the other perspective, each euro is worth more dollars.  What this means is that a tourist with a fixed number of euros to spend on vacation will be able to buy more dollars with that fixed number of euros.  In essence, going on vacation to the United States will have become cheaper for them.


We know from the law of demand that, when the price of a thing drops, consumers will be willing and able to buy more of it.  When the dollar depreciates against the euro, the price of American vacations essentially goes down for people from the euro zone.  When this happens, those people will (ceteris paribus) buy more American vacations.  Since Donald’s hotels make much of their money from European visitors, this means that business will improve.  Perhaps you can even say that the depreciation of the dollars will make his business great again.

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