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Unformatted text preview: for inferior goods at lower income levels. Lower price of a substitute good reduces demand and shifts the demand curve left. C: International investors decide to buy more Euro bonds as the global economy improves. As investors buy more Euro bonds, they will buy fewer U.S. Treasury bonds. Demand for the U.S. dollar falls. Some of the international investors are U.S. investors, and so they will have to sell dollars in order to buy Euros to purchase Euro bonds. The supply of dollars increases. Both these shifts work to lower the exchange rate for U.S. dollars, thus weakening the U.S. dollar and strengthening the Euro. S D2 D1...
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This note was uploaded on 09/08/2011 for the course MGMT 407 taught by Professor Staff during the Spring '11 term at S.F. State.
- Spring '11