Question 13 1 pts Assume the United States and Europe operate with flexible exch

Question

Question 13 1 pts Assume the United States and Europe operate with flexible exchange rates. Other things equal, if the Federal Reserve in the United States lowers U.S. interest rates relative to the European interest rates, then O the U.S. dollar will appreciate relative to the euro. O the euro will appreciate relative to the U.S. dollar. Imports from Europe will be less expensive for U.S. businesses. O Imports from the United States will be more expensive for Europe businesses. Question 14 1 pts If the supply and demand for foreign exchange determines exchange rates and there is no government intervention, then the exchange rate system is referred to as: O a gold standard system. O a fixed exchange rate system. O a flexible exchange rate system. O a managed floating exchange rate system.

Explanation / Answer

1- now as the interest rates in u.s falls this means that there will be a capital outflow from unioted states to europe, thus there will be a decrease in demand for dollar against euros. thus there will be an appreciation in euro relative to dollar.

so answer is B

2- when the exchnage rate is determined in such a way thatthere is no government intervention this means that the exchange rate system is of flexible exchnage rate.

so answer is c

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