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1.2 (Ch. 4) Aggregate Effects on Exchange Rates. Your firm exports goods to the UK, you are assigned to forecast the value of GBP against
1.2 (Ch. 4) Aggregate Effects on Exchange Rates. Your firm exports goods to the UK, you are assigned to forecast the value of GBP against the USD i.e., you forecast SiUSD/GBP). Explain how each of the following conditions will affect the value of the GBP, holding other things equal. Then, aggregate all of these impacts to develop an overall forecast of the GBP's movement against the USD. a. US. ination has suddenly increased substantially, while U.K.'s ination remains low. b. U.S. interest rates have increased substantially, while U.K.'s interest rates remain low. c. The US. income level increased substantially, while the U.K.'s income level has remained unchanged. (1. The US. is expected to impose a small tariff on goods imported from the UK. The UK. government plans to leave the European Union. f. Combine all expected impacts to develop an overall forecast. ['3
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