Suppose the United States decides to reduce export subsidies U.S. agricultural products, but it does not decrease taxes or increase any other jovernment spending. On the following graph, indicate the effect of a reduction in export subsidies on the demand for dollars in the U.S. foreign exchange market.

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Chapter14: A Macroeconomic Theory Of The Open Economy
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1. Initial Effect
2. Saving Effect
STEP: 1 of 2
Suppose the United States decides to reduce export subsidies on U.S. agricultural products, but it does not decrease taxes or increase any other
government spending.
On the following graph, indicate the effect of a reduction in export subsidies on the demand for dollars in the U.S. foreign exchange market.
Supply
Demand
Supply
Demand
Quantity of Dollars
Real Exchange Rate
Transcribed Image Text:1. Initial Effect 2. Saving Effect STEP: 1 of 2 Suppose the United States decides to reduce export subsidies on U.S. agricultural products, but it does not decrease taxes or increase any other government spending. On the following graph, indicate the effect of a reduction in export subsidies on the demand for dollars in the U.S. foreign exchange market. Supply Demand Supply Demand Quantity of Dollars Real Exchange Rate
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