Recall that an exchange rate is the price of one currency in another. For example, it may take US $1.35 to buy 1 British Pound.Alsorecall the interest rates affect exchange rates.

What do you predict will happen to the foreign exchange rate if interest rates in the United States increase more than in the UK? (In other words, which currency will become stronger?)

How would such a change affect US exports to the UK? Would it be less expensive for an American tourist to take a vacation to London after the interest rate change? Be sure to clearly explain and justify your reasoning.

Ensure you have presented your assignment in a logical format, that has an introduction paragraph, the body (one or more paragraphs), and a concluding paragraph.

The following criteria will be used to grade the papers:

• Realistically and thoroughly explains what might happen to the foreign exchange rate.
• Makes realistic predictions about what might happen to US exports and explains why.
• Realistically predicts what might happen to the price of a London vacation and explains why.
• Organization and style of the essay.