Resources Exchange Rates II: The Asset Approach in the Short Run- End of Chapter Problem We can use the asset approach to both make predictions about how the market will react to current events and understand how important these events are to investors. Consider the behavior of the Union/Confederate exchange rate during the Civil War. How would each of the following events affect the exchange rate, defined as Confederate dollars per Union dollar, E as ? Exchange rate increases Exchange rate decreases The Confederacy increases the money supply by 2,900% between July and December 1861. The Union Army suffers a defeat in Battle of Chickamauga in September 1863. The Confederate Army suffers a major defeat with Sherman's March in the autumn of 1864. Answer Bank Incorrect