Topic 6.4 Changes in ForEx Markets @ReviewEcon.com 1. Take a look at the graphs for the dollar foreign exchange market below. Then, read the scenarios and identify which graph best illustrates the impact on the dollar foreign exchange market. 6/$ Pe Q of $ Q1 QE Qof $ Q of $ Graph A Graph B Graph C E/$ IPe P1 Pe Pi Q of $ Q of $ Q of $ Graph D Graph E Graph F US consumers increase their purchases of European goods European consumers increase their purchases of US goods The price level in the United States increases due to expansionary fiscal policy Expansionary fiscal policy in the European Union increases the EU price level Contractionary fiscal policy in the US decreases US income In the EU, Contractionary fiscal policy decreases EU income Interest rates in the US increase Interest rates in the US decrease2. For each of the following scenarios, indicate what would shift in the foreign exchange market for US F + dollars and whether the currency would appreciate or depreciate. What shifts and what Appreciate or direction? Depreciate Chinese businesses import more US almonds Contractionary monetary policy decrease the US price level Demand increases and Appreciate supply decreases Expansionary monetary policy increases US real GDP American consumers purchase fewer foreign exports