Question
Think of the U.S. as the domestic country and Great Britain (GB) as the foreign country.Let e stand for the domestic price of
Think of the U.S. as the domestic country and Great Britain (GB) as the foreign country.Let "e" stand for the domestic price of one unit of the foreign currency.Ifedecreases from 1.7 to 1.6, then holding other determining factors constant,
a. we had a depreciation of the dollar against the .
b. U.S. buyers would find that goods purchased from GB would now be cheaper.
c. then e' (i.e., the price of one U.S. $ in terms of ) would also decrease.
d. GB buyers find that goods purchased from the U.S. would now be cheaper.
e. we had an appreciation of the against the dollar.
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