European Demand For U.s. Government Bonds

Another impact the euro could have on the American economy is by effecting the exchange rate of the dollar. Although there is great potential for the euro to have a positive impact on American business, there still is much uncertainty regarding the long-term effect it will have on the dollar's role as the world's dominant currency. Federal Reserve chairman Alan Greenspan in his remarks on the euro on November 30, 2001 states that, "clearly the

C. the simultaneous purchase of currencies from several countries in hopes of profiting from increasing

17. Assume that the market for the Euro begins in equilibrium. Then, incomes rise very fast in Europe while the United States enters a recession. In the market for the Euro,

11. Describe at least three exchange rate factors that are likely to attract foreign investors to a country 's currency. Explain why these factors are attractive for foreign investors. (3-6 sentences. 3.0 points)

b. Explain what impact the change in the value of the dollar between 2008 and 2009 will have on the United States current account.

We also need to take into consideration that by injecting more money to the economy, it will decrease the exchange rate and as a result it will depreciate the U.S. dollar.

The financial crisis of 2008 has been described as the worst financial crisis the world has seen since the great depression, but there are now murmurings of the potential for an even greater financial crisis, a currency crisis, caused by the demise of the US Dollar. The Dollar has been the reserve currency of the world since it took over from the Pound at the end of world war two, but we examine if it is about to crash spectacularly?

Assuming U.S. goods and foreign goods are substitutes, more demand for American goods creates more demand for U.S. currency. More demand of the U.S. currency relative to the demand of the foreign currency due to a given market force (let’s say for example economic growth in U.S) will cause the U.S. dollar to appreciate. Therefore, the U.S. dollar appreciates as demand for U.S. dollar increases from foreigners, and at the same time, the foreign currency depreciates as they supply more of foreign currency to purchase U.S. dollars. This is illustrated by the graph

D) a foreign demand for dollars and the satisfaction of this demand increases the supplies of foreign monies held by U.S.

Australia’s dollar value changes every hour which can have a large impact or small impact on our economy and the world economy. The dollar Impacts businesses in Australia that play an important role in the exportation of goods and importation of raw materials Pettinger, T. (2013). If the Australian dollar was too depreciate it would make exports cheaper and imports into Australia more expensive. The impact of the depreciation of the Australian dollar matter upon the elasticity of demand, If firms sell goods that are price inelastic, then the fall in their foreign price will have a relatively small increase in demand. If exports are price sensitive, then there’s a bigger percentage increase in demand (Pettinger, T. 2013). A possible problem of a depreciation in the Australian dollar is that it may cause inflation. Firms could then face costs such as greater uncertainty in inflation does result. Both demand and inflation are major causes in the value and change of the Australian dollar.

This is because these stable currency countries have been given an artificially weak currency meaning that their exports are more competitive globally. As well, it has widened these countries market since most of their exports go to the countries who also use the euro, not the entire European Union's free trade places as the euro makes transactions more efficient (it eliminates the foreign exchange risk).

B. Suppose an American exporter has just received a payment of € 100,000, how many dollars will result upon conversion?

Interest rates: higher interest rates increase foreign demand (which is dependant on the future predictions of the performance) for the dollar as investors buy these Canadian securities. “If foreign investors anticipate a decline in the value of the canadian dollar, they would demand a higher interest rate on canadian dollar securities.” (IN TEXT CITATION)

“The price of everything raises and falls from time to time and place to place; and with every such change the purchasing power of money changes so far as that thing goes” (Alfred Marshall). As a consumer, buying a product or service is a choice we have, different elements affect that choice. We might not realize all those outside factors at the time of purchase, but as Alfred Marshall said, prices are always changing, affecting our spending. One of those outside factors is the foreign exchange market. “The foreign exchange market spans the globe, with prices moving and currencies trading somewhere—every hour of every business day” (Eiteman, Stonehill, & Moffett, 2016, p. 119). What does this mean to consumers? It depends on whether the U.S. dollar appreciates or depreciates. Having a strong U.S. dollar is better for consumers than a weak U.S. dollar because it increases the value of the U.S. dollar, increases traveling, and gives consumers more purchasing options.

Explain how the international trade flows should initially adjust in response to the changes in inflation (holding exchange rates constant). Explain how the international capital flows should adjust in response to the changes in interest rates (holding exchange rates constant).