Question 1 What factors determine the demand for British pounds in foreign excha

Question

Question 1 What factors determine the demand for British pounds in foreign exchange markets? How are exchange rates determined under a flexible exchange rate system?

Question 2 Why can't all the balance of payments accounts be in surplus?

Question 3 How can tariffs protect U.S. jobs? Do tariffs lead to a net increase in jobs? Explain. Who are the winners and losers from trade restrictions? Given that trade restrictions impose losses on an economy, why are trade restrictions so common?

Question 4 Describe developing countries and how they differ from industrial market economies. How can international trade aid development? In what ways does the international economy impose problems on developing countries?

Question 5 How can two countries both be better off as a result of trade?

Explanation / Answer

What factors determine the demand for British pounds in foreign exchange markets?

There are a number of factors that can determine exchange rates in a system with a flexible exchange rate. In general, these factors have to do with the relative levels of demand for the various currencies. Let us look at some of the most important of these factors.

First, there is demand for exports from a given country. The higher the demand for these exports, the greater the demand for that country

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