Suppose that the US government deficit causes interest rates in the United States to rise relative...

  

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Suppose that the US government deficit causes interest rates in the United States to rise relative to those in the European Union. a. Assuming all else remains constant, explain how this would impact the supply and demand for US dollars. b. Show this change on the graph below using the market for foreign exchange. c. What can you conclude about the exchange rate? Suppose that the US government deficit causes interest rates in the United States to rise relative to those in the European Union. a. Assuming all else remains constant, explain how this would impact the supply and demand for US dollars. b. Show this change on the graph below using the market for foreign exchange. c. What can you conclude about the exchange rate?

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Impact of US Interest Rate Rise on Dollar Supply and Demand a Impact on Supply and Demand SupplyA higher US interest rate makes holding US dollars mor... View the full answer