Analyze the effects of temporary increase in european supply, International Economics

Assignment Help:

Using a figure describing both the U.S. money market and the foreign exchange market, analyze the effects of a temporary increase in the European money supply on the dollar/euro exchange rate.

Answer:  A raise in the European money supply will decrease the interest rate on the euro and thus will cause the schedule of the expected euro return expressed in dollars to shift down that causing a reduction in the dollar/euro exchange rate that is an appreciation of the U.S. Dollar and the euro depreciates beside the dollar. The U.S. money supply and money demand aren't going to be affected and thus the interest rate in the U.S. will stay the same.

 

2385_Analyze the effects of temporary increase in european supply.png


Related Discussions:- Analyze the effects of temporary increase in european supply

Member of the wto, Q. It has been claimed that the Chinese burst of modern...

Q. It has been claimed that the Chinese burst of modernization which has been propelling its manufactured exports throughout the world at an unprecedented rate, is made possible b

IMF''s Role in European zero-euro debt crisis, What exactly is IMF and why ...

What exactly is IMF and why is it so important in helping Europe? How exactly does it help Europe and what effects does its help have on rest of the world?

How did the european single currency evolve, Q. How did the Europea...

Q. How did the European single currency evolve? Answer: The answer is related to the crumple of Bretton Woods and the European Currency reform of 1969-1978. The Werner

Reverse effect on terms of trade, Q. An export subsidy has the reverse eff...

Q. An export subsidy has the reverse effect on terms of trade to the effect of an import tariff. Domestically a tariff will raise the price of the import good, deteriorating the

Capital account liberalization, Q. "Trade liberalization could preced...

Q. "Trade liberalization could precede capital account liberalization." Discuss. Answer: It is probably true. The issue is associated to the theory of second best and

Opportunity cost, what is the criticism of opportunity cost

what is the criticism of opportunity cost

Discuss the hechscher-ohlin model, Q. Countries that are willing to toler...

Q. Countries that are willing to tolerate an unusually high quantity of pollution relative to their supplies of other factors would leads to export "pollution-intensive" goods. D

Composition of production in trade, Q. Using the diagram, show what happen...

Q. Using the diagram, show what happens to the composition of production (that is quantity of cloth per 1 unit of food) in Australia once trade is established between the two coun

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd