Consider the foreign exchange market. Suppose there is an increase in domestic income. Then, the demand curve will shift to the right and the exchange rate will increase. the supply curve will shift to the left and the exchange rate will increase. the demand curve will shift to the left and the exchange rate will decrease. the supply curve will shift to the right and the exchange rate will doro

Consider the foreign exchange market. Suppose there is an increase in domestic income. Then, the demand curve will shift to the right and the exchange rate will increase. the supply curve will shift to the left and the exchange rate will increase. the demand curve will shift to the left and the exchange rate will decrease. the supply curve will shift to the right and the exchange rate will doro

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter36: Exchange Rates And Financial Links Between Countries

Section: Chapter Questions

Problem 11E

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Question

Image

Consider the foreign exchange market. Suppose there is an increase in domestic
income. Then,
the demand curve will shift to the right and the exchange rate will increase.
the supply curve will shift to the left and the exchange rate will increase.
the demand curve will shift to the left and the exchange rate will decrease.
the supply curve will shift to the right and the exchange rate will decrease.

In the short run, an increase in government purchases will
increase interest rate and decrease consumption and investment.
decrease total output.
increase interest rate and increase consumption and investment.
decrease interest rate.

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