If American demand for purchases of British goods has decreased, ...

[jwb375]

If American demand for purchases of British goods has decreased, how would you expect the equilibrium exchange rate in the market for dollars to respond? Support your answer graphically.
 
  What will be an ideal response?

Question 2

Data indicates that recessions following financial crises ________ recessions which do not follow financial crises.
 
  A) are more severe than
  B) are equally severe as
  C) are less severe than
  D) Data does not show any link between the severity of recessions following financial crises.

[patma1981]

Answer to Question 1

If Americans are demanding fewer British goods, they will trade fewer dollars in the foreign exchange market for British pounds. This decrease in the supply of dollars is represented by the shift to the left in the supply of dollars below. As the supply of dollars decreases, the equilibrium exchange rate rises (the dollar appreciates).

Answer to Question 2

A

[jwb375]

Gracias!

[nothere]

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