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What would happen to the exchange rate

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Question - Exchange Rate Determination

a) Assume that Britain imports wheat and exports oil (both priced in US$). Show with appropriate diagrams (import demand, export supply, supply and demand for £'s) what would happen to the exchange rate ($/£) if the world price of wheat decreased in the short term case of "unstable" exchange rates. Explain fully what can give rise to this situation in the short term.

b) Briefly explain what might give rise to the J curve.

Reference no: EM132810957

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