Figure 17.3 The Swiss Franc Under a System of Floating Exchange Rates

-Refer to Figure 17.3. If income grows in the U.S. and falls in Switzerland, then we would expect a(n)

Question

Figure 17.3 The Swiss Franc Under a System of Floating Exchange Rates
 
-Refer to Figure 17.3. If income grows in the U.S. and falls in Switzerland, then we would expect a(n)

Quizplus · Accepted Answer

When income grows in the U.S., Americans will buy more imported goods, including those from Switzerland, increasing the demand for francs. Conversely, if income falls in Switzerland, the Swiss will buy fewer U.S. goods, decreasing the supply of francs in the foreign exchange market. This leads to a depreciation of the dollar.

Figure 173 the Swiss Franc Under a System of Floating Exchange