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Based on the Modern Asset Theory (Which Is Similar to the Loanable

Question 4

Essay

Based on the modern asset theory (which is similar to the loanable funds theory), using supply and demand factors, explain what would likely happen to the value of the U.S. dollar (holding other factors constant) under the following scenarios:
a. The European Central Bank engages in quantitative easing with a target of lower the country's real interest rate.
b. The U.S. increases trade barriers and tariffs for imported goods from other countries.
c. A trading partner of the U.S. offers desired products globally with technological breakthroughs offering these goods at an attractive price relative to the U.S.
d. The U.S. inflation rate goes up and is higher than its trading partner countries.

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