Analyze the effects of temporary increase in european supply, International Economics

Assignment Help:

Using a figure describing both the U.S. money market and the foreign exchange market, analyze the effects of a temporary increase in the European money supply on the dollar/euro exchange rate.

Answer:  A raise in the European money supply will decrease the interest rate on the euro and thus will cause the schedule of the expected euro return expressed in dollars to shift down that causing a reduction in the dollar/euro exchange rate that is an appreciation of the U.S. Dollar and the euro depreciates beside the dollar. The U.S. money supply and money demand aren't going to be affected and thus the interest rate in the U.S. will stay the same.

 

2385_Analyze the effects of temporary increase in european supply.png


Related Discussions:- Analyze the effects of temporary increase in european supply

Discuss differences between absolute ppp and relative ppp, Discuss the diff...

Discuss the differences between Absolute PPP and Relative PPP . Answer:  Absolute Purchasing Power Parity (PPP) states that the exchange rate between two currencies equals the

Foreign trade, Role of foreign trade to the economic development?

Role of foreign trade to the economic development?

Explain the characteristics of developing countries, Question: The Maur...

Question: The Mauritian experience of growth and development has been referred as an economic miracle. The island had successfully shifted from an agrarian

Economic decline, Q. In 1986, the price of oil on world markets dropped sha...

Q. In 1986, the price of oil on world markets dropped sharply. Since the United States is an oil-importing country, this was widely regarded as good for the U.S. economy. Yet in

Comparative advantage in the land-intensive product, Q. Factor-intensity r...

Q. Factor-intensity reversals define a situation in which the production of a product can be land-intensive in one country, and relatively labor intensive in another ( at given re

What are the benefits and costs of a monetary union, The first African Econ...

The first African Economists Congress organized by the African Union concentrated on the creation of a monetary union and the introduction of single currency in Africa. (a) Ref

Effects of the reunification of eastern and western germany, Q. Sho...

Q. Show the effects of the reunification of eastern and western Germany in 1990 on both Germany and its neighbouring European countries using the AA - DD framework. A

Explain how a rise in real income affects aggregate demand, Q. Expl...

Q. Explain how a rise in real income affects aggregate demand. Answer: An increase in domestic real income Y leads to a rise in disposable income Yd. This increases

CSA, what is meant by country specific advantage?

what is meant by country specific advantage?

What can explain failure of relative ppp to hold in reality, What can expla...

What can explain the failure of relative PPP to hold in reality? Answer: Government procedures of the price level differ from country to country. One cause for these differe

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd