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Daily Exchange Rates: European Euros per U.S. Dollar 0.98 0.96 0.94 H 0.92 0.80 0.88 0.86 0.84 0.82 Jan Feb Mar Nov Dec 17 17

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Daily Exchange Rates: European Euros per U.S. Dollar 0.98 0.96 0.94 H 0.92 0.80 0.88 0.86 0.84 0.82 Jan Feb Mar Nov Dec 17 17 17 17 May 17 17 Aug 17 17 17 17 17 1) The first graph presented here shows the value of 1 US dollar measured in euros, during 2017. Notice the clear downward trend over the year. IF this trend was due to the impact on international trade of inflation in the USA and of inflation in the Eurozone, what would we conclude about the level of inflation in the USA compared to the level of inflation in the Eurozone? Explain. Draw a fully labeled foreign exchange market supply and demand diagram for the US dollar. Show the impact of US and eurozone inflationDaily Exchange Rates: Peruvian New Soles per U.S. Dollar 3.6 3.4 3.2 2.8 2.7 "Jul Aug Sep Oct NovDec Jan FobMar AprMay Jun Jul Aug Sep Oct NovDec Jan Feb 14 14 14 14 14 14 15 15 15 15 15 15 15 15 15 15 15 15 16 16 2) The second graph presented here shows the value of 1 US dollar measured in Peruvian soles, from mid-2014 to early 2016. Notice the clear upward trend over that time. IF this trend was due to the impact on international trade of inflation in the USA and of inflation in Peru, what would we conclude about the level of inflation in the USA compared to the level of inflation in Peru? Explain. Draw a fully labeled foreign exchange market supply and demand diagram for the US dollar. Show the impact of US and Peruvian inflation on the demand and supply for the dollar, and use your diagram to help explain your

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