Discuss the foreign exchange market equilibrium, Electrical Engineering

Assignment Help:

Q. To answer the following question, please refer to the figure below. Concentrating only at the upper right quadrant, discuss the foreign exchange market equilibrium.

Answer: The upper right quadrant illustrates the balance in the foreign exchange market.

We start with an Interest Parity Condition:

R$ = RE+ (Ee$/E - E$/E) / E$/E.

Generally two effects are present:

R1$ moves to R2$ and E1$/E shifts to E2$/E.

An increase in the interest rate usually creates an excess demand for dollar deposits and appreciation in the currency market.

1010_Discuss the foreign exchange market equilibrium.png

Though in this case the increase is because of higher expected inflation or higher expected financial growth in the U.S which implies a faster predictable depreciation of the dollar against the euro E thus Ee$E goes up and thus reduces the attractiveness of U.S deposits.


Related Discussions:- Discuss the foreign exchange market equilibrium

Analog communication systems, Q. Analog communication systems? An analo...

Q. Analog communication systems? An analog message is a continuum of possible amplitudes at any given time, and analog signals are continuous in time and in amplitude, such as

Calculate sending-end voltage at 0.9 pf lagging, A three-phase, 34.5-kV, 60...

A three-phase, 34.5-kV, 60-Hz, 40-km transmission line has a per-phase series impedance of 0.2+j0.5/km. The load at the receiving end absorbs 10 MVA at 33 kV. Calculate the follow

Energy, Explain different stage in energy audit?

Explain different stage in energy audit?

What is ringer circuit in telephone hand set, Q. What is Ringer Circuit in ...

Q. What is Ringer Circuit in telephone hand set? Purpose of the ringer is to alert destination party of incoming calls. Audible tone from the ringer should be load enough to be

Analysis flow, Analysis Flow Similar to most subjects, the analysis of...

Analysis Flow Similar to most subjects, the analysis of semiconductor devices is also performed by starting from simpler problems and regularly progressing to more complex one

Compute the capacitance, Figure shows the cross-section of an electrostatic...

Figure shows the cross-section of an electrostatic problem with translational symmetry: a rectangular coaxial cable. The inner conductor is held at 10 volts and the outer conductor

Determine self inductances of coils, Determine self inductances of coils: ...

Determine self inductances of coils: The number of turns in two coupled coils A and B are 600 and 1700 respectively. While a current of 6 A flows in coil B, the total flux in

Explain working of capacitor motors, Q. Explain working of Capacitor motors...

Q. Explain working of Capacitor motors? Capacitor motors have a capacitor in series with the auxiliary winding and come in three varieties: capacitor start, two-value capacitor

Realization of digital filter design, why we are going to realization of di...

why we are going to realization of digital filter after finding the H(z).

Compute the primary current and the braking torque, A three-phase, wye-conn...

A three-phase, wye-connected, 400-V, four-pole, 60-Hz induction motor has primary leakage mpedance of 1 + j2  and secondary leakage mpedance referred to the primary at standstill

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