using a well labelled graph, explain how the real exchange rate between the US and EU is determined in the long-run. also, explain the slopes of the demand and supply curves in your graph. if there is an increase in the relative demand for european goods, what will happen to the real exchange rate?
In the long run supply of good and services in each country depends on factors of production like labour, capital and technology not price and exchange rate.
The demand of us product relative to the demand for EU products depends on relative price of this product or the real exchange rate. When the real exchange rate qUS/EU=(E$/€PEU)/PUS is high the relative demand for US product is high.
When the relative supply of US product math the relative demand of US product. There is tendency for the price of US product relative to EU product to change.
using a well labelled graph, explain how the real exchange rate between the US and EU...
I need Number 3 answered and explained please. Briefly explain using appropriate formulas: How each of the following changes will affect the exchange rate (dollars per euro) according to the monetary approach to exchange rates 1. a. b. c. d. The US money supply increases The EU money supply decreases The US national income increases. The EU national income decreases. How each of the following changes will affect the real exchange rate (the number of US baskets per EU basket...
5. Changes in the foreign-exchange market The following questions focus on the exchange rate between the euro and the Danish krone. Assume the exchange rate is flexible. The exchange rate is defined as the number of euros you must pay for one krone. Suppose an economic downturn in Denmark causes Danish incomes to decrease, while European incomes remain unchanged Shift the appropriate curve or c on the following graph to illustrate how this affects the market for Danish kroner if...
true or false, explain Define the exchange rate as the amount of U.S. dollars per euro (EUSD/euro). Under the General Model of Long-Run Exchange Rates of Chapter 5 an increase in the demand for U.S. output relative to European output causes a long run appreciation of the dollar against the euro. Do not forget to include a graph to support your answer. (15 points)
Explain by using graph how exchange rate determined Use supply and demand diagrams to verify answers. A. Supply decreases and demand is constant B. Demand decreases and supply is constant. C. Supply increases and demand is constant D. Demand increases and supply increases E. Demand increases and supply is constant. F. Supply increases and demand decreases. G. Demand increases and supply decreases H. Demand decreases and supply decreases
D 3. In a graph of supply and demand for US dollars, with the exchange rate on the vertical axis, suppose that the US interest rate decreases. Then the demand curve will shift to the __and the exchange rate will. left; decrease left; increase right; decrease right; increase
appreciate/depreciate appreciate/depreciate increase/decrease increase/decrease appreciate/depreciate The following questions focus on the exchange rate between the euro and the Danish krone. Assume the exchange rate is flexible. The exchange rate is defined as the number of euros you must pay for one krone. Suppose an economic downturn in Denmark causes Danish incomes to decrease, while European incomes remain unchanged. Shift the appropriate curve or curves on the following graph to illustrate how this affects the market for Danish kroner if all...
If the exchange rate between US and Mexico is 1 U.S. dollar for 100 Icelandic Kronas, the U.S. economy is stronger than the Icelandic economy, and U.S. consumers have 100 times more buying power than an Icelandic consumers. Do you agree or disagree with the statement. If there is increase in U.S. tourism and an increase in U.S. interest rates, what will happen to the U.S. dollar compared to other currencies in the foreign exchange market? Use the supply and...
Using shifts in supply and demand curves, describe how a change in the exchange rate affected your industry. Label the axes, and state the geographic, product , and time dimensions of the demand and supply curves you are drawing. Explain what happened to industry price and quantity by making specific references to the demand and supply curves. How can you profit from future shifts in the exchange rate? How do you predict future changes in the exchange rate? You can...
What will happen to the trade balance and the real exchange rate of the US if Congress decreases government purchases to balance the budget? Graph this situation using the open economy model. What happens when countries outside the US implement fiscal austerity to satisfy the IMF?
Consider world consisting of two trading entities: the US and the EU. The EU is the exporter of cheese to the US and the importer of oil from the US. Assume the world price of both cheese and oil are set in terms of dollars ($). Also assume that there is no barriers or restrictions on trade for either good. Also assume that the entire exchange between the US and EU is made of trade account transactions and that there...