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30 October, 07:17

In the open-economy macroeconomic model, other things the same, which of the following combinations make the exchange rate fall?

a. U. S. investment demand falls and foreign demand for U. S. goods falls

b. U. S. investment demand falls and foreign demand for U. S. goods rises

c. U. S. investment demand rises and foreign demand for U. S. goods falls

d. U. S. investment demand rises and foreign demand for U. S. goods rises

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Answers (1)
  1. 30 October, 08:59
    0
    The correct answer is option A.

    Explanation:

    When there is an decline in the investment demand less money will be demanded domestically in U. S.

    When people from foreign nations buy goods from U. S, they pay in dollars. So, in order to pay they demand U. S dollars. A fall in the demand for U. S goods in the international market will further lead to a decline in the demand for U. S dollars by the foreign consumers.

    A decline in the demand for currency will lead to fall in the exchange rate.
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Home » Business » In the open-economy macroeconomic model, other things the same, which of the following combinations make the exchange rate fall? a. U. S. investment demand falls and foreign demand for U. S. goods falls b. U. S.
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