quiz4 - World trade is increasing requiring more currency....

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AGEC 217 Quiz 24 11/18/09 1. (10) What is happening to the value of the US$ against the Euro? The value of the dollar against the Euro has fallen 17% since May. 2 . (90) Explain why the value of the dollar is changing? (25) Imports vs. Exports: US$ down some. We are buying more imports than we are selling exports, scattering dollars around the world, decreasing US$ value. (15) Avoid inflation: US$ up a little. We have little inflation and some foreigners are buying dollars to avoid the ravages of inflation with their home currency, increasing US$ a little. (35) US Securities: US$ down a lot. The US stock market is mixed, our bonds pay only moderate interest rates, and we do not appear to be managing our economy as well as we usually have with huge trade deficit and federal budget deficit. (15) World trade: US$ up a little.
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Unformatted text preview: World trade is increasing requiring more currency. AGEC 217 Quiz 24 11/18/09 Name _____________________ Seat Number ________ Explain what will happen to the exchange rate step-by-step if the US begins to buy a great deal more from Canada than they buy from us, both on floating exchange rate system. (14) Canada will get lots of US dollars and (14) their value will fall. (14) The US will find that Canadian products are more expensive because our dollars buy fewer of theirs. (14) We will begin to buy less from them. (14) Canadians will find that American products are cheaper because they can buy our currency cheaper. (14) They will begin to buy more from us. (16) With us buying less from them and they buying more from us the trade imbalance is corrected....
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quiz4 - World trade is increasing requiring more currency....

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