Assume that an economic boom occurs in the United States, so that the United States has a much higher growth rate than other nations. What will happen to the exchange rate of the U.S. dollar?
The boom in the United States will lead to an increase in demand for goods and services, including foreign-made goods and services. (Recall the Keynesian consumption function relating income and consumption spending.) The increase in demand for foreign-made items (increase in imports) will increase the supply of dollars offered in the foreign exchange market and tend to decrease the equilibrium price. The exchange rate will fall-the dollar will depreciate-compared to other currencies.
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Aggregate demand ________ if the expected inflation rate increases because ________
A) increases; people expect to receive cost of living raises as the inflation begins B) does not change; inflation does not affect the aggregate demand curve C) increases; people want to make purchases now before the price of goods and services begin to increase D) decreases; people wait for the exchange rates to change before making purchases E) decreases; people want to wait for the price of goods and services begin to decrease
Which of the following events could result in the consumption function shifting from CF0 to CF1?
A) a decrease in wealth B) an increase in expected future income C) a decrease in disposable income D) an increase in disposable income E) an increase in the real interest rate
If society decides it wants more of one good and ________, then it has to give up some of another good and incur some opportunity costs
A) new resources are discovered B) all resources are fully utilized C) technology advances D) resources are underutilized
To gain market share
A) a firm needs to be in a competitive market. B) a firm needs to limit substitutes. C) a firm needs to produce a commodity. D) a firm needs to be a substitute for other products