FRQ # 3 (Unit 5) 3. Assume that the real interest rate in both the United States and the European Union equals 4.5 percent. (a) Assume that the real interest rate in the United States falls to 3.75 percent. (i) How will the flow of nancial capital between the United States and the European Union be affected? Explain. (ii) Using a correctly labeled graph of the foreign exchange market for the euro, show how the value of the euro would change relative to the United States dollar in a exible exchange rate system. (b) Explain how the change in the value of the euro in part (a)(ii) would affect the European Union's net exports