What will happen to the exchange rate between the British pound and the U.S. dollar if British prices increase?
What will be an ideal response?
British price increases will decrease the supply of dollars, so all else equal the dollar will appreciate in value relative to the pound. British price increases will also decrease the demand for British pounds in the United States.
You might also like to view...
Suppose labor and capital are the only two resources used for production. In the long run:
a. both capital and labor can move freely between sectors. b. only labor can move between sectors. c. only capital can move between sectors. d. both capital and labor are blocked from moving between sectors.
Which of the following instances will total revenue or receipts decline?
A) Price rises and demand is inelastic. B) Price falls and demand is elastic. C) Price rises and demand is elastic. D) Price falls and demand is unit elastic.