Question 10 a b and c Assume that there is a free-floating exchange rate. Will the following cause sterling to appreciate or depreciate relative to other currencies? In each case, you should consider whether there is a shift in the demand or supply curves of sterling (or both) and which way the curve(s) shift(s). You may assume that the impacts are ceteris paribus, that is, everything else remains the same. Illustrate your answers and give a short explanation in terms of currency supply and demand. (a) UK imports increase. (b) UK interest rates rise relative to those abroad. (c) The UK experiences lower inflation than other countries, but with no change in interest rates.
Question 10 a b and c Assume that there is a free-floating exchange rate. Will the following cause sterling to appreciate or depreciate relative to other currencies? In each case, you should consider whether there is a shift in the demand or supply curves of sterling (or both) and which way the curve(s) shift(s). You may assume that the impacts are ceteris paribus, that is, everything else remains the same. Illustrate your answers and give a short explanation in terms of currency supply and demand. (a) UK imports increase. (b) UK interest rates rise relative to those abroad. (c) The UK experiences lower inflation than other countries, but with no change in interest rates.
Macroeconomics: Principles and Policy (MindTap Course List)
13th Edition
ISBN:9781305280601
Author:William J. Baumol, Alan S. Blinder
Publisher:William J. Baumol, Alan S. Blinder
Chapter19: The International Monetary System: Order Or Disorder
Section: Chapter Questions
Problem 8DQ
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Question 10 a b and c
Assume that there is a free-floating exchange rate. Will the following cause sterling to
appreciate or
whether there is a shift in the
way the curve(s) shift(s). You may assume that the impacts are ceteris paribus, that is,
everything else remains the same. Illustrate your answers and give a short explanation in
terms of currency supply and demand.
(a) UK imports increase.
(b) UK interest rates rise relative to those abroad.
(c) The UK experiences lower inflation than other countries, but with no change in interest
rates.
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