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What is the probable effect of each of the following on the exchange rate of a country, other things being equal? The quantity of oil
What is the probable effect of each of the following on the exchange rate of a country, other things being equal?
- The quantity of oil imports is greatly decreased, but the value of imported oil is higher due to price increases.
- The country's inflation rate falls well below that of its trading partners.
- Rising labor costs of the country's manufacturers lead to a worsening ability to compete in world markets.
- The government greatly expands its gifts of food and machinery to developing countries.
- A major boom occurs with rising employment.
- The central bank raises interest rates sharply.
- More domestic oil is discovered and developed.
Which of these two would have the greatest impact on the exchange rate and why?
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