Y5

5. (14 pts) Use a graph of the foreign exchange market for dollar assets to illustrate the effect in each problem. Explain what happens to the exchange rate carefully. a. (7) Suppose people expect that the pries of American goods fall. What will happen to the U.S. exchange rate? b. (7) Suppose the Federal Reserve announces to raise the interest rates in the U.S. What will happen to the U.S. exchange rate?5. (14 pts) Use a graph of the foreign exchange market for dollar assets to illustrate the effect in each problem. Explain what happens to the exchange rate carefully. a. (7) Suppose people expect that the pries of American goods fall. What will happen to the U.S. exchange rate? b. (7) Suppose the Federal Reserve announces to raise the interest rates in the U.S. What will happen to the U.S. exchange rate