In the foreign exchange market, how does a fall in the U.S. interest rate affect the supply of dollars?
What will be an ideal response?
The fall in the U.S. interest rate increases the supply of dollars as U.S. residents supply more dollars in order to obtain foreign currency with which to buy foreign assets that now have relatively higher interest rates.
You might also like to view...
The XX schedule shows how much
A) fiscal expansion is needed to hold the current account surplus at X as the currency is devalued by a given amount. B) monetary expansion is needed to hold the current account surplus at X as the currency is devalued by a given amount. C) fiscal expansion is needed to hold the current account surplus at X as the currency is evaluated by a given amount. D) fiscal and monetary expansions are needed to hold the current account surplus at X as the currency is devalued by a given amount. E) foreign funding is needed to hold the current account surplus at X as the currency is devalued by a given amount.
The spending multiplier indicates that:
a. changes in investment, government, or consumption spending trigger much larger changes in real GDP. b. an autonomous increase in saving will cause output to rise by a multiple of the additional saving. c. a market economy will be more stable than classical economists thought. d. the marginal propensity to consume is greater than one.
If real GDP increased by 2% and nominal GDP increased by 2%, then output: a. increased and the price level increased
b. increased and the price level decreased. c. increased and the price level remained unchanged. d. remained unchanged and the price level increased.
Using tradable allowances instead of quotas may be a better solution to the provision of common resources because they:
A. allow the government to set a specific amount of the good to be consumed, while quotas do not. B. ensure that the resource is allocated to those with the highest willingness to pay, while quotas do not. C. assign private property rights-and an incentive, as owners, which means common resource now get overused, and quotas do not. D. allocate the good in a less efficient way, and quotas do not.