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Draw and carefully label the Euro-U.S. dollar foreign exchange graph as discussed and illustrated
in the textbook (The Foreign Exchange Market: Chapter 17 in the 4
th
or 5
th
Business School
Edition or Chapter 20 in the 13
th
general edition). Assume we are currently in market equilibrium.
Illustrate using the graph how the equilibrium euro/dollar foreign exchange rate would be affected
by the following events, holding all else constant. Use a different graph for each part. Explain in
words why the equilibrium exchange rate changed
A decrease in US short-term interest rates while Euro interest rates were unchanged.
An increase in the Eurozone inflation rate relative to the US.
An increase in US productivity relative to the Euro Area.

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Draw and carefully label the EuroUS dollar foreign exchan.pdf

  • 1. Draw and carefully label the Euro-U.S. dollar foreign exchange graph as discussed and illustrated in the textbook (The Foreign Exchange Market: Chapter 17 in the 4 th or 5 th Business School Edition or Chapter 20 in the 13 th general edition). Assume we are currently in market equilibrium. Illustrate using the graph how the equilibrium euro/dollar foreign exchange rate would be affected by the following events, holding all else constant. Use a different graph for each part. Explain in words why the equilibrium exchange rate changed A decrease in US short-term interest rates while Euro interest rates were unchanged. An increase in the Eurozone inflation rate relative to the US. An increase in US productivity relative to the Euro Area.