The spot exchange rate between the dollar and the Euro is a floating, or flexible, rate. What are the effects of each of the following on this exchange rate? Illustrate what happens on the foreign market of euros. 1- There is a large increase in the demand for U.S. exports. 2- There is a large increase in the demand for E.U products. 3- There is a large inflow of capital from the EU to the USA. 4- Political uncertainties in Europe lead U.S. investors to pull out their investment from the Euro zone. 5- US investors will by euro-denominated bonds. 6- European investors expect a financial crisis in the USA to happen soon. Explain

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Lets analyze the effects of each scenario on the spot exchange rate between the US dollar and the Euro Large Increase in Demand for US Exports Effect ... View the full answer