Explain and show graphically how an increase in incomes in the United States will affect equilibrium in the foreign exchange market?
What will be an ideal response?
Higher incomes in the United States will increase demand for imports in the United States. The increased demand for imported goods will result in an increase in the supply of dollars (shift the supply curve to the right) as Americans trade in their dollars for the currencies of the countries from which they wish to purchase goods. The increase in supply results in a decrease in the equilibrium exchange rate (the dollar depreciates), and an increase in the equilibrium quantity of dollars traded.
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Early American manufacturers were particularly concerned about minimizing:
a. raw material costs. b. labor costs. c. state-levied taxes on profits. d. energy costs.
Jim is haggling with a car dealer on the price of a used car. During the bargaining, Jim discovers that the car has a significant number of scratches which he had not noticed before. The total surplus from the sale has
a. Increased b. Decreased c. Was not affected d. All of the above
Buying a cup of coffee with a dollar bill represents the use of money as a:
a. medium of exchange. b. unit of account. c. store of value. d. all of these.
A country with a strong bargaining power is likely to direct the terms of trade in its favor
a. True b. False Indicate whether the statement is true or false