Question: Explain how the following factors affect the dollars exchange rate under a system of market-determined exchange rates: (a) A rise in the U.S. price level,
Explain how the following factors affect the dollar’s exchange rate under a system of market-determined exchange rates:
(a) A rise in the U.S. price level, with the foreign price level held constant;
(b) Tariffs and quotas placed on U.S. imports;
(c) Increased demand for U.S. exports and decreased U.S. demand for imports;
(d) Rising productivity in the United States relative to other countries;
(e) Rising real interest rates overseas, relative to U.S. rates;
(f) An increase in U.S. money growth;
(g) An increase in U.S. money demand.
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