Explain and show graphically the effect of a decrease in U.S. budget deficits that decrease U.S. interest rates on the demand and supply of U.S. dollars for euros
What will be an ideal response?
A decrease in U.S. interest rates would decrease the desire to invest in financial assets in the United States relative to the rest of the world. The demand for dollars would fall, causing the exchange rate for the dollar to fall. The lower exchange rate would increase net exports, leading to a smaller current account deficit.
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In 2004, retailers and exporters in the United States were happy, as were their customers from abroad, due to:
a. a reduction in import tariffs by the EU. b. the lifting of an embargo on U.S. exports to Germany. c. the high value of the U.S. dollar compared to other currencies. d. the low value of the U.S. dollar compared to other currencies.
A bowed production possibilities curve is consistent with
A) an unchanged opportunity cost. B) a technologically inefficient society. C) the underutilization of productive resources. D) highly specialized resources.