Answer the questions below.
a.Suppose the Federal Reserve raises the federal funds rate in the United States but people believe that the inflation rate will rise by more than the Fed raised the federal funds rate.
What do you expect to happen to the exchange rate? Explain why.

b.As the exchange rate changes in the direction you determined in part a, what happens to the prices of imports and exports in the United States and in other countries? Explain.

c.What happens to net exports in the United States and in other countries that trade with the
United States in the short run? In the long run? Explain.

Question

Answer the questions below.
a.Suppose the Federal Reserve raises the federal funds rate in the United States but people believe that the inflation rate will rise by more than the Fed raised the federal funds rate.
What do you expect to happen to the exchange rate? Explain why.

b.As the exchange rate changes in the direction you determined in part a, what happens to the prices of imports and exports in the United States and in other countries? Explain.

c.What happens to net exports in the United States and in other countries that trade with the
United States in the short run? In the long run? Explain.

Quizplus · Accepted Answer

The Answer of Answer the questions below.
a.Suppose the Federal Reserve raises the federal funds rate in the United States but people believe that the inflation rate will rise by more than the Fed raised the federal funds rate.
What do you expect to happen to the exchange rate? Explain why.

b.As the exchange rate changes in the direction you determined in part a, what happens to the prices of imports and exports in the United States and in other countries? Explain.

c.What happens to net exports in the United States and in other countries that trade with the
United States in the short run? In the long run? Explain.

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