1b, high or lower

1c, low or higher or high

2b, lower or high

2c, fall or rise

3b, lower or higher

4a, low or high

4b, low or high

4c, more or less

4. Exchange rates and the demand for domestic goods Piano Palace Co produces electronic keyboards in the United States, its most popular keyboard sells for $1,500. KeySharp Co., Plano Palace's primary competitor, is based in Germany and sells keyboards to US customers online. KeySharp sells its keyboards for 1,000 euros Suppose that initially, the exchange rate was $1.60 per euro. This means that the price of KeySharp's keyboards to US consumers was 1.000 euros * 51.60 per euro = $1,600.00 This means that the price of KeySharp's keyboards to US consumers was 5 Because this dollar price of keyboards from KeySharp in than the dollar price of Weyboards from Piano Palace, demand for Plano Palace keyboards is likely relative to KeySharo's keyboards in the United States. Now suppose that the euro weakens relative to the dollar, and the exchange rate changes to $1.25 After this change, the price of KeySharp's keyboards to US consumers is 5 Because this dollar price of keyboards from KeySharp is than the dollar price of keyboards from Plano Palace, demand for Plano Palace keyboards is likely relative to KaySharp's keyboards in the United States, due to the change in the exchange rate, now Suppose that Piano Palace not only sells keyboards in the United States but also exports and sells them to France (another country in the eurozone). When the euro was $1.60, consumers in France paid euros for keyboards from Piano Palace. At this exchange rate, the euro price of Piano Palace keyboards was than that of KeySharp keyboards. However, at the newer exchange rate the euro price of Piano Palace keyboards is now This would cause French consumers to inerente derriand for zle Generalizing from the results of this fictionalized scenario, when other currencies are weak against the dollar, US imports should be relatively while US exports should be relatively leading to a favorable position in terms of the balance of trade