Solution-Depreciation of the dollar relative to the euro

Depreciation of the dollar relative to the euro

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Suppose that half of U.S. foreign assets are denominated in euros, while all of American liabilities to foreigners are denominated in dollars. Suppose that at the beginning of the year, U.S. foreign assets were valued at 100% of U.S. GDP, while American liabilities to foreigners were valued at 150% of GDP. By how much and in what direction would a 10% depreciation of the dollar relative to the euro affect the U.S. net international investment position?

Reference no: EM132440717

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Depreciation of the dollar relative to the euro

Reference no: EM132440717

Reference no: EM132440717

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