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Author Question: How will an increase in the expected future exchange rate affect the current supply and demand ... (Read 116 times)

wenmo

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on: Jun 29, 2018
How will an increase in the expected future exchange rate affect the current supply and demand curves for dollars?
 
  What will be an ideal response?

Question 2

Read the following statements and determine if they are true or false.
 
  I. According to the quantity theory of money, an increase in the growth rate of the quantity of money increases inflation in the long run.
  II. Historical and international data show that there is no correlation between inflation and money growth.
  A) I and II are both true.
  B) I and II are both false.
  C) I is true and II is false.
  D) I is false and II is true.


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zacnyjessica

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Reply #1 on: Jun 29, 2018
Answer to Question 1

An increase in the expected future exchange rate increases the return from holding U.S. dollars. As a result, the demand for dollars increases and the demand curve shifts rightward while the supply of dollars decreases and the supply curve shifts leftward.

Answer to Question 2

C


wenmo

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Reply #2 on: Jun 29, 2018
Thank you


zacnyjessica

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Reply #3 on: Jun 29, 2018
No problemo


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