Assume that there is a free-floating exchange rate. Will the following cause the exchange rate to appreciate
Question:
Assume that there is a free-floating exchange rate. Will the following cause the exchange rate to appreciate or depreciate? In each case you should consider whether there is a shift in the demand or supply curves of sterling (or both) and which way the curve(s) shift(s).
(a) More electronic goods are imported from Japan.
Demand curve shifts left/shifts right/does not shift Supply curve shifts left/shifts right/does not shift Exchange rate appreciates/depreciates
(b) UK interest rates rise relative to those abroad.
Demand curve shifts left/shifts right/does not shift Supply curve shifts left/shifts right/does not shift Exchange rate appreciates/depreciates
(c) The UK experiences a higher rate of inflation than other countries.
Demand curve shifts left/shifts right/does not shift Supply curve shifts left/shifts right/does not shift Exchange rate appreciates/depreciates
(d) Speculators believe that the rate of exchange will appreciate.
Demand curve shifts left/shifts right/does not shift Supply curve shifts left/shifts right/does not shift Exchange rate appreciates/depreciates
Step by Step Answer:
Essential Economics For Business
ISBN: 9781292728940
7th Edition
Authors: John Sloman, Elizabeth Jones