In 2010, fears were growing that the dollar would experience a significant decline in value. What are the likely implications for the euro-dollar exchange rate?
What will be an ideal response?
If people expect the dollar to decline in value, Δ will be negative, thus increasing the expected foreign return on assets. This should lead to an appreciation of the euro relative to the dollar.
You might also like to view...
A factor that turned out to be a weakness of the classical theory of growth is its
A) emphasis on saving and investment. B) assumption that the growth rate of the population increases when income increases. C) reliance on constant growth in technology. D) neglect of the subsistence real wage.
A bank has no excess reserves. Then it receives a new deposit for $100,000. If it has a desired reserve ratio of 20 percent, by how much can it increase its loans?
A) $20,000 B) $80,000 C) $120,000 D) $180,000
When the coupon rate on newly issued bonds ________ relative to older, outstanding bonds, the market price of the older bond ________
A) increases; rises in the secondary market B) increases; falls in the secondary market C) decreases; falls in the primary market D) decreases; falls in the secondary market
The principal objective of industrial regulation is to:
A. Increase product safety B. Promote improvements in the quality of life C. Protect the consuming public from the market power of natural monopolies D. Solve problems associated with industry such as the problems of water and air pollution