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Homework answers / question archive / You should wait to tackle this question until after lecture on Tuesday, December 1
You should wait to tackle this question until after lecture on Tuesday, December 1.) What would you expect each of the following developments to do to the price of dollars in euros? a. The incoming Biden administration eliminates the tariffs that had been imposed by the Trump administration on goods from the European Union (while the EU does not change its trade policy). b. Large budget deficits in the Europe cause the real interest rate in Europe to rise relative to that in the United States. c. Inflation is lower in the United States than in Europe. d. There is a shift in European tastes toward American goods.
A. Due to incoming of Biden administration the tariffs has been eliminated thus import restriction has been lifted as a result import will rise in America for Europian Products as a result demand for Europian Euros will increase leading to fall in value of dollars in Euros.
B. Due to higher interest rates in Europe in comparison to America , people will not borrow from Europe and will be more inclined in taking loan from America as a result demand for American Dollars will increase resulting in increase in value of dollars in Euros.
C. Due to lower inflation in America as compared to Europe , goods will be less expensive in America as result demand for American Goods will increase resulting in demand for American dollars as a result there will be increase in value of Dollars in Euros .
D. Due to shift in Europian tastes towards American goods , people will tend to buy more american goods and less europian goods as a result demand for American Goods will increase as result there would be increase in value of dollars in Euros .
