(2).(a)What factors affect equilibrium exchange rate in the foreign exchange market? Use appropriate graphical illustrations to analyze the impact of relative inflation rates and relative interest rates on the exchange rate for the British pound sterling in terms of the U.S. dollar.

Principles of Economics 2e
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ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter29: Exchange Rates And International Capital Flows
Section: Chapter Questions
Problem 25CTQ: If a countrys currency is expected to appreciate in value, what would you think will be the impact...
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(2).(a)What factors affect equilibrium
exchange rate in the foreign exchange
market? Use appropriate
graphical illustrations to analyze the
impact of relative inflation rates and relative
interest rates on
the exchange rate for the British pound
sterling in terms of the U.S. dollar.
(b)Šuppose the exchange rate for the Iraqi
Dinar moves from $0.00069 to $0.00072.
Which currency
has appreciated and by what percentage?
Which currency depreciated and by what
percentage?
Transcribed Image Text:(2).(a)What factors affect equilibrium exchange rate in the foreign exchange market? Use appropriate graphical illustrations to analyze the impact of relative inflation rates and relative interest rates on the exchange rate for the British pound sterling in terms of the U.S. dollar. (b)Šuppose the exchange rate for the Iraqi Dinar moves from $0.00069 to $0.00072. Which currency has appreciated and by what percentage? Which currency depreciated and by what percentage?
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