ECON 5705 Chap 6 Brendan O’Neal

ECON 5705 Chap 6 Brendan O’Neal - Brendan...

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Brendan O’Neal ECON 5705 Chapter 6 1 to 8 Exercises 1. Sales of exports increase since the marc, lira, and yen prices of American products decrease and we see an increase in the domestic sales because the price of imports rises; this is all assuming consistent mark ups. 2. Internal hedges would offset foreign currency payables; dollar appreciation would cause the overseas prices to rise and revenue drop due to a drop in sales. There could have also been a dollar swap to make the most out of invested dollars and currency. 3. After dollar appreciation, Cummins may want to outsource production and invest in foreign assets to his advantage, when the dollar is deflated. 4. Transaction demand is the amount of money needed to cover the needs of an organization or country. Transaction demand is how much of a specific jurisdiction’s currency the members of the jurisdiction needs to continue to purchase the goods and services that are in demand. The healthier the economy, the higher the transaction
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ECON 5705 Chap 6 Brendan O’Neal - Brendan...

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