What will gradually happen to the value of the dollar

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Reference no: EM13234617

Suppose that economists have made the following projections for the coming year:

Exports $540B, imports $710B, capital outflow $320, capital inflow $420. As the year is unfolding, it turns out that these projections are proving to be quite accurate

(a)Explain what will gradually happen to the value of the dollar on the foreign exchange market as result.

(b)Given that there is pressure on the dollar to move in the direction you described in (a), what actions could policymakers (both fiscal government and central bank) take to offset this pressure (in other words, to keep the foreign exchange value of the dollar stable)?

Reference no: EM13234617

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