Sixth Assignment

Sixth Assignment - less; this increases the amount of the...

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Maxwell Miller April 18, 2007 Assignment 6 Section 5 If foreign investors liquidated part of their investments in the U.S. economy there would be unpleasant consequences for Americans. This is due to the fact that the American reserves do not contain enough money to pay the foreign investors. Also, the dollars would need to be exchanged for foreign currency which would not have an adequate exchange rate. The demand for the dollar will drop drastically due to the fact that foreign investors would be selling their investments in the U.S. The investments can be stocks in the stock market, U.S. government bonds, buying land in the U.S., or even building a factory in the U.S. If this happens the U.S. will need to export more and import
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Unformatted text preview: less; this increases the amount of the U.S. dollars demanded for current transactions, and decreases the amount supplied for current transactions. When the price of a nation’s currency falls, imports rise and exports fall. When the value of a dollar falls foreigners purchase goods and services produced by the U.S. at a lower price. This benefits the consumers but not the sellers. When the dollar drops it benefits companies that produce goods that are exported, companies that sell the exported goods to foreign countries, and workers in these companies. When the dollar drops it is detrimental to companies that want to consume imported goods, companies that specialize in importing goods and workers in these companies....
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This note was uploaded on 04/03/2008 for the course ECON 101 taught by Professor Gottlieb during the Spring '08 term at Rutgers.

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