What is the effect when there is an increase in the European inflation rate relative to the U.S. interest rate?
a. Europeans buy fewer dollars, shifting S1 to S2.
b. U.S. consumers buy more European goods, shifting D1 to D2.
c. Europeans supply euros to buy more dollars, shifting S1 to S2.
d. U.S. consumers demand more euros, shifting S1 to S2.
c. Europeans supply euros to buy more dollars, shifting S1 to S2.
You might also like to view...
If a country with a large government debt uses money creation to service and repay the debt, this will lead to
a. lower interest rates. b. an appreciation of the nation's currency in the foreign exchange market. c. inflation, higher interest rates, and a financial crisis. d. rapid economic growth, as the expansionary monetary policy stimulates the economy and generates the additional tax revenue to service the larger debt.
If the domestic income of a nation's citizens increase thus causing consumption spending to increase, then we generally expect net export spending to:
A. remain constant because when we increase domestic purchases it is directly offset by a reduction in foreign purchases. B. decrease as well because as consumption increases we also buy more foreign goods and services. C. increase as well because as consumption increases we also buy more foreign goods and services. D. there is not enough information to determine what would happen.