Analyze the effects of an increase in the European money supply on the dollar/euro exchange rate
What will be an ideal response?
The main points are: An increase in the European money supply will reduce the interest rate on the euro, and thus causes the euro to depreciates against the dollar. The U.S. money demand and money supply are not going to be affected, and thus the interest rate in the U.S. will remain the same.
You might also like to view...
In economic theory, an unemployment rate of _________ considered desirable
a. 5 percent or less b. 9 to 10 percent c. Under 12 percent d. 18 percent
The principle of comparative advantage states that
a. whoever has a comparative advantage in producing a good or service also has the absolute advantage b. whoever has an absolute advantage in producing a good or service also has the comparative advantage c. whoever can produce a good or service using fewer resources than another individual has the comparative advantage d. total production of every good or service can be greater if individuals specialize according to their comparative advantage e. comparative advantage is maximized if each individual specializes according to his or her absolute advantage