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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When a multinational affiliate replicates elements of a production process in a foreign country it is called ________ foreign direct investment
A) vertical B) horizontal C) transitional D) bisectional E) direct
The reserve ratio is 20 percent. If the Fed buys $1 million of U.S. government securities from a bond dealer by transmitting the funds to the dealer?s deposit account at Bank ABC, then
A) Bank ABC can make no additional loans. B) Bank ABC can make additional loans up to $800,000. C) Bank ABC can make additional loans up to $1 million. D) Bank ABC cannot make any additional loans, but the system as a whole can make additional loans up to $1 million.