What do reports that the dollar is "undervalued" mean? How will foreign exchange markets respond to this information? Support your answer graphically
What will be an ideal response?
If the dollar is "undervalued," that means that the current exchange rate (foreign currency per dollar) is less than the relative purchasing power of the dollar. This implies that currency traders will increase their holdings of dollars (the supply curve for dollars will shift to the left) and decrease their holdings of other currencies against which the dollar is "undervalued." As the supply of dollars decreases, the exchange rate will rise. The exchange rate will continue to rise until the dollar's value accurately reflects its relative purchasing power.
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Barter works best when: a. there is an absence of a double coincidence of wants
b. many different products are available in the economy. c. money is readily available to establish relative prices. d. each trader has what the other wants and wants what the other has. e. highly developed economies achieve extensive specialization of labor.
Refer to the accompanying figure. Assume the market is originally at point W. Movement to point Z is a combination of:
A. an increase in supply and an increase in quantity demanded. B. an increase in supply and an increase in demand. C. a decrease in supply and an increase in quantity demanded. D. an increase in demand and an increase in quantity supplied.
Recall the Application about federal quality standards in the market for kiwifruit to answer the following question(s).Recall the Application. The asymmetric information about kiwifruit was reduced by:
A. reducing the price of U.S. kiwifruit. B. advertising. C. a federal government marketing order. D. All of these
To totally internalize an externality, a government can levy a tax related only to the physical quantity of pollution if
A) the economic damages associated with the pollution are different across different locations. B) the economic damages are too large to be determined. C) the economic damages associated with the pollution are the same across different locations. D) the economic damages are zero.