Question

Use a demand and supply graph to show how increased demand for investments in the US...

Use a demand and supply graph to show how increased demand for investments in the US by foreigners leads to an appreciation of the US dollar in international currency markets. I am looking for the effects of increased foreign investments on exchange rates.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

In diagram, on X axis quantity of dollar is shown, on y Axis exchange rate is shown ,euro per dollar.

Increase in investment demand in US will result in increase demand of US dollar, as foreigners need US dollar to invest in US. So a result demand curve of US dollar increase .

The new demand curve intersect supply curve at a higher exchange rate,so equilibrium exchange rate increases.

Conclusion: Increase in investment in US by foreigners, result in increase in value of US dollar or increase in exchange rate.

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
Changes in _____________,____________, and ___________ can all shift the demand for a foreign currency (or the...
Changes in _____________,____________, and ___________ can all shift the demand for a foreign currency (or the supply of the domestic currency). expectations, rates of return, and relative inflation expectations, rates of return and productivity expectations, prices, and policies rates of return, prices, and fiscal policy If the rate of inflation in the US is 3% and the rate of inflation in Germany is 4%, we expect: the demand for the Euro to increase and the Euro to appreciate. the supply...
For each of the following: draw a supply/demand graph for the currency market in question. Label...
For each of the following: draw a supply/demand graph for the currency market in question. Label axes, the supply and demand curves, and equilibrium exchange rate. Then show and explain with words what will happen to the market after the shock described. Include the effect on the foreign exchange rate. Explain. A. the market for Russian Rubles - foreigners significantly increase their tourism/ travel into Russia. B. the market for Japanese Yen - Japanese imports from the United States increase...
When demand for Canada’s exports falls: a. supply of the Canadian dollar in the foreign exchange...
When demand for Canada’s exports falls: a. supply of the Canadian dollar in the foreign exchange market rises. b. the U.S. federal government will always respond by increasing U.S. tax rates. c. the U.S. federal government will always respond by increasing U.S. exports. d. Canadian producers will sell more goods to foreigners. e. demand of the Canadian dollar in the foreign exchange market falls.
Consider the Euro-dollar exchange rate (nominal exchange rate = Euros/$US). For each of these examples, use...
Consider the Euro-dollar exchange rate (nominal exchange rate = Euros/$US). For each of these examples, use a supply/demand diagram for the foreign exchange market to show the impact on the exchange rate. In each case, does the exchange rate appreciate or depreciate? a. A debt crisis in Europe causes investors holding Euro denominated securities to move to dollar denominated securities. b. The European Central Banks raises interest rates, attracting inflows from U.S. financial investors into European markets. c. The European...
Using a supply-and-demand graph and assuming competitive markets, show and explain the effect on equilibrium price...
Using a supply-and-demand graph and assuming competitive markets, show and explain the effect on equilibrium price and quantity of the following. Increased graduation of new doctors on the market for physician services. Increased awareness of a healthy diet in the population on the market for hospital services.
TRUE FALSE. If false CORRECT the wrong word/words An increase in the nominal exchange rate ($...
TRUE FALSE. If false CORRECT the wrong word/words An increase in the nominal exchange rate ($ per Euro) will make the dollar less expensive to foreigners If iD= 10% and iF = 5%, for investors to be indifferent between holding both one year financial assets, they should expect expect that over the next year the domestic currency will appreciate. A trade deficit implies that that country will require a surplus in the financial account compensating that deficit. An increase in...
How does coronavirus affect exchange rate markets? Is COVID-19 a shift factor of demand and supply...
How does coronavirus affect exchange rate markets? Is COVID-19 a shift factor of demand and supply for the US Dollar?
Consider the foreign exchange market for British pounds from the US perspective (i.e., imagine the supply-demand...
Consider the foreign exchange market for British pounds from the US perspective (i.e., imagine the supply-demand diagram where the pound is the foreign currency). Draw a diagram to illustrate the impact of the US Federal Reserve using a contractionary monetary policy and state what happens to the value of the British pound.
5.           If the U.S. government wants to strengthen the dollar, it can: a)have the Fed use...
5.           If the U.S. government wants to strengthen the dollar, it can: a)have the Fed use monetary policy to reduce interest rates, thereby increasing capital flows into its country. b)reduce the supply of dollars on the international currency market by limiting the right of U.S. citizens to buy foreign currencies. c)have the Fed buy foreign currency, paying for it with newly printed dollars. d)Answers (a), (b), and (c) will all help the government to set the exchange rate at its...
Show, using a supply & demand graph, the effect on the equilibrium price and quantity of...
Show, using a supply & demand graph, the effect on the equilibrium price and quantity of the good in question of the following events. Assume markets are initially in equilibrium. These are qualitative answers. An original and new market equilibrium on the graph is needed. Show that clearly. The market for Apples is initially in equilibrium. Suppose the price of Pears, a substitute for Apples, declines while at the same time more Apple Orchards are opened, so more firms enter...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT