5. 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., Piano 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 $1.60 per euro =$1,600.00. This means that the price of KeySharp's keyboards to US consumers was . Because this dollar price of keyboards from Keysharp is than the dollar price of keyboards from Piano Palace, demand for Piano Palace keyboards is likely keyboards in the United States. Now suppose that the euro weakens relative to the dollar, and the exchange rate changes to $1.25 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). keyboards is now . This would cause French consumers to increase demand for while US exports should be relatively, leading to a favorable position in terms of the balance of trade. 5. 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., Piano 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 $1.60 per euro =$1,600.00. This means that the price of KeySharp's keyboards to US consumers was . Because this dollar price of keyboards from Keysharp is than the dollar price of keyboards from Piano Palace, demand for Piano Palace keyboards is likely keyboards in the United States. Now suppose that the euro weakens relative to the dollar, and the exchange rate changes to $1.25 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). keyboards is now . This would cause French consumers to increase demand for while US exports should be relatively, leading to a favorable position in terms of the balance of trade