« previous next »

Author Question: What are the three factors that affect the demand for foreign currency? What will be an ideal ... (Read 29 times)

sjones

  • Hero Member
  • *****
  • Posts: 520
on: Jun 30, 2018
What are the three factors that affect the demand for foreign currency?
 
  What will be an ideal response?

Question 2

Describe the chain of events leading to exchange rate determination for the following cases: (a) An increase in U.S. money supply (d) Increase in growth rate of U.S. money supply (c) Increase in world relative demand for U.S.
 
  products (d) Increase in relative U.S. output supply


SVictor

  • Sr. Member
  • ****
  • Posts: 365
Reply #1 on: Jun 30, 2018
Answer to Question 1

The three factors that affect the demand for foreign currency are expected return, risk and liquidity.

Answer to Question 2

Chain of events leading to exchange rate determination:
=  (Pus/PE)
Increase in U.S. money supply: Pus rises in proportion to the money supply; q remains the same. All dollar prices will rise (including dollar price of euro).
Increase in growth rate of U.S. money supply: Inflation rate, dollar interest rate, Pus, E, rises in proportion to Pus.
Increase in world relative demand for U.S. products: E falls, and q does as well.
Increase in relative U.S. output supply: Dollar depreciates, lowers relative price of
U.S. output, rise in q, effect on E is not clear since q and Pus work in opposite directions.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

The horizontal fraction bar was introduced by the Arabs.

Did you know?

Though methadone is often used to treat dependency on other opioids, the drug itself can be abused. Crushing or snorting methadone can achieve the opiate "rush" desired by addicts. Improper use such as these can lead to a dangerous dependency on methadone. This drug now accounts for nearly one-third of opioid-related deaths.

Did you know?

One way to reduce acid reflux is to lose two or three pounds. Most people lose weight in the belly area first when they increase exercise, meaning that heartburn can be reduced quickly by this method.

Did you know?

The first oral chemotherapy drug for colon cancer was approved by FDA in 2001.

Did you know?

Vaccines cause herd immunity. If the majority of people in a community have been vaccinated against a disease, an unvaccinated person is less likely to get the disease since others are less likely to become sick from it and spread the disease.

Environmental factors restricting the distribution of Chthamalus to the upper intertidal zone. Environmental factors restricting the distribution of Chthamalus to the upper intertidal zone.
The recent mass upheavals in Tunisia, Egypt, Libya, Yemen, and Syria gave political scientists a cha The recent mass upheavals in Tunisia, Egypt, Libya, Yemen, and Syria gave political scientists a cha
Schematic diagram of virulence factors of Helicobacter pylori. Schematic diagram of virulence factors of Helicobacter pylori.
Illustrated correlation between the Mendelian postulates of unit factors Illustrated correlation between the Mendelian postulates of unit factors
Soybean plants in nitrogen-poor soil show how root nodules affect growth. Only the darker green plan Soybean plants in nitrogen-poor soil show how root nodules affect growth. Only the darker green plan
ATP, an important energy currency in cells ATP, an important energy currency in cells
Video: Dissociative Disorders (Part 2)

For a complete list of videos, visit our video library