Exchange Rate Determination Graded Assignment Read Chapter 12 Back to Assignment
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Question
Exchange Rate Determination Graded Assignment Read Chapter 12 Back to Assignment Due Friday 12.01.17 at 11:45 PM Attempts: Average: 3 2. Determining long-term exchange rates Aa Aa Consider two countries, the United States and Germany, which trade with each other. Suppose that the U.S government imposes an import tariff on German goods, while there are no changes in Germany's international policies. Complete the following table by indicating the effects of the new import tariff on the U.S. economy Effect The relative price of German goods The demand for euros The supply of euros Decreases Decreases Does not chan As a result of the new import tariff, the U.S. dollar appreciates The following graph shows the supply (S0) and demand (DO) for the German euro in the United States before the new import tariff. The vertical axis is the exchange rate of the euro in terms of the dollar, and the horizontal axis is the quantity of euros. Shift the appropriate curve or curves on the graph to show how the change in the trade barrier affected the equilibrium exchange rate Tool tip: Click and drag one or both of the curves. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just try again and drag it a little farther EXCHANGE RATE (Dollars per euro] SO DO QUANTITY (Millions of euro) QNA 3.16 2004-2016 Aplia. All rights reserved. Dragger 1.24 Copyright 8 2002-2013 Cengage Learning. Al nghts reserved Grade It Now Save & Continue 2013 Cengage Learning cxceptas noted. All rights reserved. Continue without saving Copyright Notices Terms of Use Privacy Notice Security Notice AccessibilityExplanation / Answer
Ans:
The impose of tariff on German goods will increase the relative price of German goods and which will decrease the demand for german goods. The decrease in the imports will decrease the demand for euro.
1) Table
2) Appreciates
Due to decrease in the demand for euros the U.S. dollar appreciates.
3) Demand curve will shift to the left.
As a result of decrease in the demand for euros the demand curve will shift to the left.
Particulars Effect The relative price of german goods Increases The demand for euros decreases The supply of euros Does not changeRelated Questions
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