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Unformatted text preview: rate creating additional demand for US $s and thus we have a negative relationship between the price of a dollar and demand for dollars. That’s why the U.S. demand for Brazilian real is downward sloping. Assuming a system of floating exchange rates between Brazil and the United States, indicate whether each of the following would cause the Brazilian real to appreciate or depreciate: (Please draw a graph for each of the situation). a. The United States unilaterally reduces tariffs on Brazilian products. => Appreciate Exchange rate Real b. Brazil encounters severe inflation. => Depreciate Exchange rate Real c. Deteriorating political relations reduce American tourism in Brazil. => Depreciate Exchange Rate Real...
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- Spring '11
- United States dollar, U.S. demand