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Assume there is a decrease in U.S. interest rates relative to that of Britain.
(a.) Would this event cause the demand for the dollar to increase or decrease relative to the demand for the pound? Why?
(b.) Has the dollar appreciated or depreciated in value relative to the pound?
(c.) Does this change in the value of the dollar make imports cheaper or more expensive for Americans? Are American exports cheaper or more expensive for importers of U.S. goods in Great Britain? Illustrate by showing the price of a U.S. cell phone in Britain, before and after the change in the exchange rate.
(d.) If you had a business exporting goods to Britain, and U.S. interest rates fell as they have in this example, would you plan to expand production or cut back? Why?
During this time period, a weather phenomenon called the Dust Bowl also occurred. Conduct an Internet search on The Dust Bowl to discover more about it.
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If supply at every price is reduced by five gallons, what will the new equilibrium price be.
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