Exchange RatesDiscuss, with providing examples, the relationship between the foreign exchange rates and Current Account Explain, why appreciation of exchange rate (E) today results in the increase of expected return from foreign currency deposits (investments), assuming expected exchange rate does not change?Explain, why changes in the exchange rates in the foreign exchange markets does not influence domestic money market?

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Answered: Discuss, with providing examples, the…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter29: International Finance

Section: Chapter Questions

Problem 4P

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Exchange Rates
1. Discuss, with providing examples, the relationship between the foreign exchange rates and Current Account
2. Explain, why appreciation of exchange rate (E) today results in the increase of expected return from foreign currency deposits (investments), assuming expected exchange rate does not change?
3. Explain, why changes in the exchange rates in the foreign exchange markets does not influence domestic money market?

Definition Definition Financial market that deals in securities or assets that are short-term in nature. The money market is responsible for keeping up the liquidity of the businesses and the organizations. These securities are usually held for a period of 12 months or less and are issued by institutions that require cash or funds for their short-term cash flow requirements. The money market is regulated by the federal government.

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