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lizsmith lizsmith
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Posts: 486
Rep: 14 0
4 years ago
The following diagram shows the demand for sterling by holders of dollars (e.g. to buy UK imports) and the supply of sterling to purchase dollars (e.g. to buy US exports). The sterling demand and supply curves are currently D0 and S0 and the exchange rate is currently £1 = $1.30.

Now assume that there is a rise in income in the UK and no change in US income. What would happen to the exchange rate assuming that one of the demand and supply curves, or both curves, shift to one of the other positions shown in the diagram.

▸ Fall to $1.10

▸ Fall to $1.20

▸ Rise to $1.40

▸ Rise to $1.50
Textbook 
Essential Economics for Business

Essential Economics for Business


Edition: 5th
Authors:
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jzhu11jzhu11
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#1
Posts: 414
Rep: 63 0
4 years ago
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wrote...
#2
4 years ago
The following diagram shows the demand for sterling by holders of dollars (e.g. to buy UK imports) and the supply of sterling to purchase dollars (e.g. to buy US exports). The sterling demand and supply curves are currently D0 and S0 and the exchange rate is currently £1 = $1.30.

Now assume that the rate of inflation is higher in the USA than in the UK. What would happen to the exchange rate assuming that one of the demand and supply curves, or both curves, shift to one of the other positions shown in the diagram.

▸ Fall to $1.10

▸ Fall to $1.20

▸ Rise to $1.40

▸ Rise to $1.50
wrote...
#3
4 years ago
Rise to $1.50
wrote...
#4
4 years ago
The following diagram shows the demand for sterling by holders of dollars (e.g. to buy UK imports) and the supply of sterling to purchase dollars (e.g. to buy US exports). The sterling demand and supply curves are currently D0 and S0 and the exchange rate is currently £1 = $1.30.

Now assume that confidence in the UK economy as a destination for inward investment decreases. What would happen to the exchange rate assuming that one of the demand and supply curves, or both curves, shift to one of the other positions shown in the diagram.

▸ Fall to $1.10

▸ Fall to $1.20

▸ Rise to $1.40

▸ Rise to $1.50
wrote...
#5
4 years ago
Fall to $1.10
wrote...
#6
4 years ago
The following diagram shows the demand for sterling by holders of dollars (e.g. to buy UK imports) and the supply of sterling to purchase dollars (e.g. to buy US exports). The sterling demand and supply curves are currently D0 and S0 and the exchange rate is currently £1 = $1.30.

Now assume that speculators on both sides of the Atlantic believe that the pound is undervalued. What would happen to the exchange rate assuming that one of the demand and supply curves, or both curves, shift to one of the other positions shown in the diagram.

▸ Fall to $1.10

▸ Fall to $1.20

▸ Rise to $1.40

▸ Rise to $1.50
wrote...
#7
4 years ago
Rise to $1.50
wrote...
#8
4 years ago
The following diagram shows the demand for sterling by holders of dollars (e.g. to buy UK imports) and the supply of sterling to purchase dollars (e.g. to buy US exports). The sterling demand and supply curves are currently D0 and S0 and the exchange rate is currently £1 = $1.30.

Now assume that UK interest rates rise relative to US ones. Assuming that this shifts one or both curves to new positions as shown in the diagram, the exchange rate will rise to $1.40.

▸ true

▸ false
wrote...
#9
4 years ago
false
wrote...
#10
4 years ago
The following diagram shows the demand for sterling by holders of dollars (e.g. to buy UK imports) and the supply of sterling to purchase dollars (e.g. to buy US exports). The sterling demand and supply curves are currently D0 and S0 and the exchange rate is currently £1 = $1.30.

Now assume that both UK incomes and US incomes fall. Assuming that this shifts one or both curves to new positions as shown in the diagram, the exchange rate will stay at $1.30.

▸ true

▸ false
wrote...
#11
4 years ago
true
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