Suppose that the us dollar-brazilian real exchange

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Trade and labor mobility

Suppose that the U.S. dollar-Brazilian real exchange rate is flexible, determined by the forces of supply and demand. Assume also that labor is immobile between the United States and Brazil due to high transportation costs.

Which of the following situations is likely to occur if there is a simultaneous decrease in the demand for U.S. goods and an increase in the demand for Brazilian goods?

The U.S. unemployment rate will increase, and the country will undergo hard economic times for a sustained period.

The U.S. unemployment rate will initially rise but then drop as the U.S. dollar depreciates against the Brazilian real.

The Brazilian unemployment rate will increase, and the country will undergo hard economic times for a sustained period.

The U.S. unemployment rate will initially rise but soon drop as unemployed Americans move to Brazil for employment.

Reference no: EM132316818

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