What effect should the given have on interest rates

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Question: Look for Trade Weighted U.S. Dollar Index: Major Currencies. Create a line graph and answer the following questions:

(a) What is the Trade Weighted U.S. Dollar Index and what is it trying to measure?

(b) What's happening to the index between 1995 and 2001? Is the USD generally appreciating or depreciating against currencies from the rest of the world?

(c) How about between 2002 and 2007? What do you predict should happen to U.S. exports and imports given the trend? Why?

(d) Monetary growth, as measured by M1, was growing faster in 2004 relative to 2007. What effect should this have on interest rates in the U.S.? What effect should that change in interest rates have on the exchange rate? Does your plot of the Trade Weighted U.S. Dollar Index confirm your intuition? Briefly explain why to each of the preceding questions.

Reference no: EM132198898

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