Question: By considering Real Exchange Rate Approach (or A General Model of Long-Run Exchange Rates): qUS/EU=(ES/PEU)/PUS a. Explain how an increase in relative demand of U.S.

By considering Real Exchange Rate Approach (or A General Model of

By considering Real Exchange Rate Approach (or A General Model of Long-Run Exchange Rates): qUS/EU=(ES/PEU)/PUS a. Explain how an increase in relative demand of U.S. products affects the real exchange rate ( qU/EU ) (a rise or a fall). Describe the chain of events step by step. b. Does this increase lead to real exchange rate appreciation or depreciation of US dollar against euro. c. By considering your decision, how this real appreciation or real depreciation of US dollar affects US exports and US imports (15 pts)

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