1.Would an increase in real GDP and real income in the U.S, other things being

equal, cause the dollar to depreciate or appreciate in the foreign exchange

market?

2. Would an increase in the real interest rate on U.S. bonds, everything else equal,

cause the dollar to depreciate or appreciate in the foreign exchange market?

3. Would an increase in European wealth, all other factors held constant, cause the

dollar to depreciate or appreciate in the foreign exchange market?

4. Ignoring default risk differences, what would make American investors purchase

foreign bonds when the U.S. interest rate is above the foreign interest rate?

5. In looking at the foreign exchange rates in the Wall Street Journal you notice the

dollar-euro spot rate is 1.085/$ and the six-month forward rate is 1.098/$.

Does this imply that the US dollar is expected to appreciate or depreciate?