6. Reread the Country Focus on the U.S. dollar, oil prices, and recycling petrodollars; then answer the
Question:
6. Reread the Country Focus on the U.S. dollar, oil prices, and recycling petrodollars; then answer the following questions:
a. What will happen to the value of the U.S. dollar if oil producers decide to invest most of their earnings from oil sales in domestic infrastructure projects?
b. What factors determine the relative attractiveness of assets denominated in dollars, euros, and yen to oil producers flush with petrodollars? What might lead them to direct more funds toward non–dollar-denominated assets?
c. What will happen to the value of the U.S. dollar if OPEC members decide to invest more of their petrodollars toward non–dollardenominated assets, such as euro-denominated stocks and bonds?
d. In addition to oil producers, China is also accumulating a large stock of dollars, currently estimated to total $1,000 billion by the end of 2006. What would happen to the value of the dollar if China and oil producing nations all shifted out of dollar-denominated assets at the same time? What would be the consequence for the United States economy?
Step by Step Answer:
ISE International Business Competing In The Global Marketplace
ISBN: 9781260092349
7th Edition
Authors: Charles Hill, G. Tomas M. Hult