Using a model of supply and demand for the dollar-pound market, where the horizontal axis is labeled quantity of British pounds, explain what happens when Americans have an increased demand for British automobiles.

What will be an ideal response?


When the demand for British autos increases in America, the demand for British pounds will increase, meaning the demand curve will shift to the right. This will result in an appreciation of the pound relative to the dollar.

Economics

You might also like to view...

It seems evident that countries would have an advantage in producing those goods that use relatively large amounts of their most abundant factor of production

a. True b. False Indicate whether the statement is true or false

Economics

Dumping occurs when a firm sells goods abroad at a price below their cost and below the price charged in their domestic market

Indicate whether the statement is true or false

Economics

A country's financial account includes which of the following?

a. net investment income b. net transfers c. exports d. imports e. sales of assets to other countries

Economics

Suppose a given basket of goods and services costs 6 dollars in the United States and 4,500 won in Korea. If the exchange rate is 900 won per dollar, purchasing power parity implies that the:

A. dollar must appreciate to restore purchasing power parity. B. dollar must depreciate to restore purchasing power parity. C. won must depreciate to restore purchasing power parity. D. exchange rate has attained its long run equilibrium value.

Economics