(a)
The shift in demand curve to the right.
(a)
Explanation of Solution
The phenomena that may shift the demand curve to the right includes an increase in the British interest rate or the U.S. price level, a decrease in the U.S interest rate or the British price level.
(b)
The shift in supply curve to left.
(b)
Explanation of Solution
All of it (an increase in the British interest rate or the U.S. price level, a decrease in the U.S interest rate or the British price level.) causes the supply curve to shift to the left.
(c)
The effect on the
(c)
Explanation of Solution
An increase in the British interest rate or a decrease on the U.S. interest rate will decrease the British’s balance of trade as the British goods become relatively more expensive. The change in the interest rate would increase the value of pound and hence will shrink the surplus or increase
Exchange rate: The exchange rate is the rate by which one country’s currency value is expressed with other country’s currency.
Float exchange rate system: It is the current exchange rate system under which the value of most currencies is determined by demand and supply.
Want to see more full solutions like this?
Chapter 20 Solutions
Principles Of Macroeconomics, Student Value Edition (11th Edition)
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education