After years of floating around 1.35 US dollars per Euro, the exchange rate fell below 1.25 US dollars per Euro during the summer of 2014. Answer:

a) How would this affect US export to Europe? (2 marks) b) What impact would this have on European exports to the US? (2 marks) c) How would this affect American tourism in Europe? (2 marks) d) How would this affect the profits of US banks with European trading subsidiaries in Paris? (which earn profit in Euro). (2 marks) e) What would happen if market participants expect the Dollar to rise/appreciate further against the Euro?