Dollar-euro exchange rate if economic growth increased – Microeconomics
1. Explain what would be the effect on the dollar/euro exchange rate if economic growth increased in the EMU but not in the United States.
2. Explain what would be the effect on the dollar/euro exchange rate if the price level increased less in the United States than in the European Monetary Union (EMU).
3. Explain what would happen to the dollar/euro exchange rate if the interest rate increased in the United States but remained unchanged in the European Monetary Union (EMU).
4. (a) What is the absolute purchasing-power parity theory? Why is this not acceptable?(b) What is the relative purchasing-power parity theory? When do we expect it to hold?(c) Do empirical tests confirm or reject the relative purchasing-power parity theory?
