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Unformatted text preview: Chapter 4 Exchange Rate Determination Suggested Homework Questions (updated 10/8/07) 1. Use three graphs below (U.S. Imports from France, U.S. Exports to France, and the euro Market) to explain how the exchange rate between the U.S. dollar and the euro is determined. US Imports from France US Exports to France euro ( ) Market D $ price price D $ per A B C E Quantity of Quantity of Exports Quantity of Imports S D Include in your explanation a discussion of how the demand for U.S. imports and the demand for U.S. exports relate to the supply and demand for francs. For the two points (A and B) on the demand curve for U.S. Imports, show the corresponding points in the euro market (label them A* and B*). For the two points (C and E) on the demand curve for U.S. Exports, show the corresponding points in the euro market (label them C* and E*). Indicate the equilibrium price in the euro market (label it P*). Explain what will happen if the exchange rate is above the equilibrium price P* (i.e., identify who will be dissatisfied with this situation, why they will be above the equilibrium price P* (i....
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This homework help was uploaded on 03/26/2008 for the course FINC 445 taught by Professor Martindale during the Spring '08 term at Texas A&M.
- Spring '08
- Exchange Rate