Exchange rate between the us dollar and the british pound

Reference no: EM133543947

Assignment:

Suppose that buyers in the UK develop a preference for US goods that result in an increase in exports from the US to the UK.

a) How would this change affect the exchange rate between the US dollar and the British Pound? Would this change be in long-term, medium-term, or short-term exchange rates?

b) If the US follows a managed floating exchange rate system, then should it stabilize the change in exchange rate?

c) What will be the effect of the change in exchange rate in part a) on the current account and capital account of the US. (You can assume that current account is the same as net exports).

Reference no: EM133543947

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