If U.S.labor productivity growth is 2 percent per annum and Swiss labor productivity growth is 6 percent per annum, then the dollar will depreciate against the franc under a system of floating exchange rates.

Question

Quizplus · Accepted Answer

Higher productivity growth in Switzerland would lead to an increase in demand for Swiss francs, causing an appreciation of the franc. In contrast, slower productivity growth in the United States would lead to a decrease in demand for dollars, causing a depreciation of the dollar. This would happen under a system of floating exchange rates where the market determines the exchange rate based on supply and demand for the currencies.

If USLabor Productivity Growth Is 2 Percent Per Annum and Swiss