Show the effect of dollar appreciation and depreciation

Reference no: EM13755409

1. Show the effect of dollar appreciation and depreciation with the euro on the price of U.S. exports and imports by updating Table, as shown in the updated table.

TABLE Effect of Dollar Appreciation and Depreciation on U.S. Exports and Imports

R = EURO/$ DOMESTIC JAN 09: JUNE 09: EFFECT ON EXPORTS (X)

PRICE R=0.76 R=0.71 AND IMPORTS (M)

U.S. exports: $1,000

Televisions

US. Imports: Euro 25,000

European cars

JAN 08: JAN 09:

R=0.68 R = 0.76

US. exports: $1,000

Televisions

U.S. imports Euro 25,000

European cars

2. If the U.S. economy is operating near full employment and the exchange rate increases (the, dollar appreciates), explain why the Federal Reserve will be less inclined to raise interest rates.

3. Based on the discussion in chapter, update the controversy over the value of the Chinese yuan in foreign currency markets. Is China still using central bank foreign exchange policy to maintain the value of the yuan? What is the current policy of the United States on this issue?

Reference no: EM13755409

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