In the figure above, illustrate the effect of an increase in the U.S. interest rate. What is the effect on the foreign exchange rate?
What will be an ideal response?
The figure above shows the effect of the increase in the U.S. interest rate. The demand for dollars increases and the demand curve shifts rightward. The supply of dollars decreases and the supply curve shifts leftward. The equilibrium exchange rate rises, to 100 yen per dollar in the figure.
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Suppose a farmer raising beef is making a normal profit. Then, because of a scare about mad cow disease, the demand for beef decreases drastically. What happens to the profits of the beef farmer in the short run and in the long run?
What will be an ideal response?
The study of how people work together to transform resources into goods and services to satisfy their most pressing wants is
a. sociology b. economics c. psychology d. anthropology e. management