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EUROS PER KRONE 1. Changes in the foreign exchange market The following questions focus on the exchange rate between the euro and the Danish krone. Assume the exchange rate is flexible. The exchange rate is defined as the number of euros you must pay for one krone. Suppose an economic downturn in Denmark causes Danish incomes to decrease, while European incomes remain unchanged. Shift the appropriate curve or curves on the following graph to illustrate how this affects the market for Danish kroner if all other things remain equal. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. EUROS PER KRONE Supply of Kroner 呸 QUANTITY OF KRONER Demand for Kroner Demand for Kroner Supply of Kroner ? The decrease in Danish incomes causes the Danish krone to the Danish krone. relative to the euro and causes the euro to relative to Suppose the price level in the eurozone rises by 12%, while the price level in Denmark remains the same. That is, the inflation rate in the eurozone is higher than in Denmark. Shift the appropriate curve or curves on the following graph to illustrate how this affects the market for Danish kroner. Supply of Kroner Demand for Kroner Demand for Kroner QUANTITY OF KRONER Supply of Kroner Suppose the real interest rates in the eurozone and Denmark are initially the same. Then the real interest rate in Denmark falls, while the real interest rate in the eurozone remains the same. This will cause the supply of kroner to causes the euro to relative to the Danish krone. and the demand for kroner to , which

EUROS PER KRONE 1. Changes in the foreign exchange market The following questions focus on the exchange rate between the euro and the Danish krone. Assume the exchange rate is flexible. The exchange rate is defined as the number of euros you must pay for one krone. Suppose an economic downturn in Denmark causes Danish incomes to decrease, while European incomes remain unchanged. Shift the appropriate curve or curves on the following graph to illustrate how this affects the market for Danish kroner if all other things remain equal. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. EUROS PER KRONE Supply of Kroner 呸 QUANTITY OF KRONER Demand for Kroner Demand for Kroner Supply of Kroner ? The decrease in Danish incomes causes the Danish krone to the Danish krone. relative to the euro and causes the euro to relative to Suppose the price level in the eurozone rises by 12%, while the price level in Denmark remains the same. That is, the inflation rate in the eurozone is higher than in Denmark. Shift the appropriate curve or curves on the following graph to illustrate how this affects the market for Danish kroner. Supply of Kroner Demand for Kroner Demand for Kroner QUANTITY OF KRONER Supply of Kroner Suppose the real interest rates in the eurozone and Denmark are initially the same. Then the real interest rate in Denmark falls, while the real interest rate in the eurozone remains the same. This will cause the supply of kroner to causes the euro to relative to the Danish krone. and the demand for kroner to , which

Exploring Economics
Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter29: International Finance
Section: Chapter Questions
Problem 6P
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EUROS PER KRONE 1. Changes in the foreign exchange market The following questions focus on the exchange rate between the euro and the Danish krone. Assume the exchange rate is flexible. The exchange rate is defined as the number of euros you must pay for one krone. Suppose an economic downturn in Denmark causes Danish incomes to decrease, while European incomes remain unchanged. Shift the appropriate curve or curves on the following graph to illustrate how this affects the market for Danish kroner if all other things remain equal. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. EUROS PER KRONE Supply of Kroner 呸 QUANTITY OF KRONER Demand for Kroner Demand for Kroner Supply of Kroner ? The decrease in Danish incomes causes the Danish krone to the Danish krone. relative to the euro and causes the euro to relative to Suppose the price level in the eurozone rises by 12%, while the price level in Denmark remains the same. That is, the inflation rate in the eurozone is higher than in Denmark. Shift the appropriate curve or curves on the following graph to illustrate how this affects the market for Danish kroner. Supply of Kroner Demand for Kroner Demand for Kroner QUANTITY OF KRONER Supply of Kroner Suppose the real interest rates in the eurozone and Denmark are initially the same. Then the real interest rate in Denmark falls, while the real interest rate in the eurozone remains the same. This will cause the supply of kroner to causes the euro to relative to the Danish krone. and the demand for kroner to , which
Transcribed Image Text:EUROS PER KRONE 1. Changes in the foreign exchange market The following questions focus on the exchange rate between the euro and the Danish krone. Assume the exchange rate is flexible. The exchange rate is defined as the number of euros you must pay for one krone. Suppose an economic downturn in Denmark causes Danish incomes to decrease, while European incomes remain unchanged. Shift the appropriate curve or curves on the following graph to illustrate how this affects the market for Danish kroner if all other things remain equal. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. EUROS PER KRONE Supply of Kroner 呸 QUANTITY OF KRONER Demand for Kroner Demand for Kroner Supply of Kroner ? The decrease in Danish incomes causes the Danish krone to the Danish krone. relative to the euro and causes the euro to relative to Suppose the price level in the eurozone rises by 12%, while the price level in Denmark remains the same. That is, the inflation rate in the eurozone is higher than in Denmark. Shift the appropriate curve or curves on the following graph to illustrate how this affects the market for Danish kroner. Supply of Kroner Demand for Kroner Demand for Kroner QUANTITY OF KRONER Supply of Kroner Suppose the real interest rates in the eurozone and Denmark are initially the same. Then the real interest rate in Denmark falls, while the real interest rate in the eurozone remains the same. This will cause the supply of kroner to causes the euro to relative to the Danish krone. and the demand for kroner to , which
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