Question

Suppose the US experiences permanent technological improvements such that its long run economic growth rate increases...

Suppose the US experiences permanent technological improvements such that its long run economic growth rate increases by 2%. Explain through a systematic sequence of impacts on relevant variables how this affects the dollar-euro exchange rate, assuming that this technological improvement is germane to only the US and that there are no policy changes in either country.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer.

Technological improvement improves the performance of the economy which attracts the foreign investors because of increase in interest rate. This will lead to increase the demand for home currency which is the dollar here. Now rise in demand for the dollar will increase the exchange rate of dollar-euro. Exchange rates of the dollar to euro and demand for dollar currency is negatively related. for e.g, if the exchange rate of the dollar to euro is 1/0.8 now then after an increase in demand for currency it will be like 0.9/0.8.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. In the long run, the most important determinant of the exchange rate between the US...
1. In the long run, the most important determinant of the exchange rate between the US dollar and the Euro is a. the prices of goods in the US and in Europe. b. economic growth in the United States. c. the flow of financial capital. d. the precautionary motive. e. speculation. 2. An increase in the U.S. demand for the Euro causes a. an increase in the U.S. dollar price of a Euro. b. the Euro to appreciate. c. the...
13. Suppose there is an increase in government spending in a closed economy. In medium-run such...
13. Suppose there is an increase in government spending in a closed economy. In medium-run such a fiscal policy will cause: none of the other answers is correct. ambiguous effects on the neutral real interest rate the nominal wage to rise no change in the neutral real interest rate the neutral real interest rate to rise 14. Suppose the economy is initially in the steady state. According to Solow model without technological progress, an increase in the depreciation rate (δ)...
Long-run economic growth requires all of the following except Select one: a. government provision of secure...
Long-run economic growth requires all of the following except Select one: a. government provision of secure property rights. b. increases in capital per hour worked. c. technological change. d. political instability. Potential GDP refers to Select one: a. the level of GDP attained by the country with the highest growth in real GDP in a given year. b. the level of GDP attained when all firms are producing at capacity. c. the extent to which real GDP is above or...
QUESTION 1 According to Malthus, exogenous increases in income would result in: People marrying for the...
QUESTION 1 According to Malthus, exogenous increases in income would result in: People marrying for the first time at younger ages. Lower mortality. People postponing when they first get married. Increase their use of contraceptives to achieve lower family size. QUESTION 2 According to the Malthusian model an improvement in technology that shifts out the production function will permanently raise income per capita. will not raise income per capita in the long-run. will result in increased population growth (at least...
QUESTION 1 According to Malthus, exogenous increases in income would result in: People marrying for the...
QUESTION 1 According to Malthus, exogenous increases in income would result in: People marrying for the first time at younger ages. Lower mortality. People postponing when they first get married. Increase their use of contraceptives to achieve lower family size. 5.00000 points    QUESTION 2 According to the Malthusian model an improvement in technology that shifts out the production function will permanently raise income per capita. will not raise income per capita in the long-run. will result in increased population...
3.   Which of the following would be LEAST LIKELY to be considered a long-run determinant of...
3.   Which of the following would be LEAST LIKELY to be considered a long-run determinant of consumption? (a) an external shock to the financial system; (b) attitudes toward thrift; (c) the availability and cost of credit; (d) asset holdings of households and businesses. 4.   Impacts of taxes can be felt in: (a) changes in the propensity to take on risk; (b) alterations of the work-leisure tradeoff; (c) adjustments in the capital-to-labor ratio and investment; (d) all of the above. 5.  ...
23. The level of the money supply is determined by the level of economic activity and...
23. The level of the money supply is determined by the level of economic activity and adjusted at the margin via the implementation of monetary policy by the Federal Reserve. Thus, the U.S. is said to have: (a) an “elastic currency;” (b) a gold standard; (c) a rule-based monetary policy; (d) an independent central bank. 24. The Employment Act of 1946 established the original monetary policy mandate of the Fed. It called for: (a) balancing the federal budget deficit; (b)...
6. A persistent increase in the actual growth rate of real GDP in excess of the...
6. A persistent increase in the actual growth rate of real GDP in excess of the growth rate of potential real GDP likely will most result eventually in: (a) accelerating inflation; (b) a recession; (c) stagflation (rising inflation and falling real economic growth); (d) a looser monetary policy from the Federal Reserve. 7. For the most part, rising U.S. inflation is associated with: (a) a much stronger U.S. dollar in foreign exchange markets; (b) growth in aggregate demand at a...
answer the following questions Q21.When the economy experiences an expansion, it is most likely the case...
answer the following questions Q21.When the economy experiences an expansion, it is most likely the case that------------------------------- GDP is increasing, unemployment is increasing, and inflation is decreasing. GDP is increasing, unemployment is decreasing, and inflation is increasing. GDP is decreasing, unemployment is decreasing, and inflation is increasing. GDP is decreasing, unemployment is decreasing, and inflation is decreasing. Q22. GDP is an important economic measurement because it provides valuable data on unemployment rates measures the combined total of all intermediate and...
Please answer the following Case analysis questions 1-How is New Balance performing compared to its primary...
Please answer the following Case analysis questions 1-How is New Balance performing compared to its primary rivals? How will the acquisition of Reebok by Adidas impact the structure of the athletic shoe industry? Is this likely to be favorable or unfavorable for New Balance? 2- What issues does New Balance management need to address? 3-What recommendations would you make to New Balance Management? What does New Balance need to do to continue to be successful? Should management continue to invest...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT