Evaluate the expected effects on exchange rates in the United States and in the second country used in each question. Use currency graphs to reflect changes in the currency values. Analyze the impact of the currency changes on the United States economy as it applies to net exports, balance of trade, AD and price levels. Work out the situation in the short run only for each scenario/ When you have finished, submit your assignment to the Unit 5: Policies and exchange rates dropbox.. 1. Madagascar's fiscal policies lead to an increase in Madagascar's real GDP - when answering the question, think about what more output does to income and spending. Assume that they are trading with the U.S. A. Graph the currency changes using two separate graphs. B. Does the U.S. dollar appreciate or depreciate? C. Does the Malagasy ariary appreciate or depreciate? D. As a result of the changing value of the U.S. dollar answer each of the following: i. U.S. exports (increase/decrease). Explain why. ii. U.S. imports (increase/decrease). Explain why. iii. U.S. AD shifts (left/right) iv. Price levels in the U.S. (rise/fall)| 2. The United States' federal budget deficit increases which causes the United States interest rates to rise. Assume that we are analyzing trade between the United States and Fiji. A. Graph the currency changes using two separate graphs. B. Does the U.S. dollar appreciate or depreciate? C. Does the Fijian dollar appreciate or depreciate? D. As a result of the changing value of the U.S. dollar answer each of the following: i. U.S. exports (increase/decrease). Explain why. ii. U.S. imports (increase/decrease). Explain why. iii. U.S. AD shifts (right/left) iv. Price levels in the U.S. (rise/fall) 3. Egypt's interest rates are increasing, while the United States interest rates remain relatively constant. Answer the questions below from the information above. A. Graph the currency changes using two separate graphs. B. Does the U.S. dollar appreciate or depreciate? C. Does the Egyptian pound appreciate or depreciate? D. As a result of the changing value of the US dollar, answer each of the following: i. U.S. exports (increase/decrease). Explain why. li. U.S. imports (increase/decrease). Explain why. iii. U.S. AD shifts (right/left) iv. Price levels in the U.S. (rise/fall) 4. There is a rapid increase in the price level in Yemen, while the United States' price level remains relatively constant. A. Graph the currency changes using two separate graphs. B. Does the U.S. dollar appreciate or depreciate? C. Does the Yemeni rial appreciate or depreciate? D. As a result of the changing value of the U.S. dollar answer each of the following: I. U.S. exports (increase/decrease), Explain why. ii. U.S. imports (increase/decrease). Explain why. iii, U.S. AD shifts (right/left) iv. Price levels in the US (rise/fall)
