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Tidy Tidy
wrote...
Posts: 4852
8 years ago
Explain and show graphically how an increase in incomes in the United States will affect equilibrium in the foreign exchange market?
Textbook 
Essentials of Economics

Essentials of Economics


Edition: 4th
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wrote...
8 years ago
 Higher incomes in the United States will increase demand for imports in the United States. The increased demand for imported goods will result in an increase in the supply of dollars (shift the supply curve to the right) as Americans trade in their dollars for the currencies of the countries from which they wish to purchase goods. The increase in supply results in a decrease in the equilibrium exchange rate (the dollar depreciates), and an increase in the equilibrium quantity of dollars traded.

 
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