This is a file upload question. Write down your solution in…
This is a file upload question. Write down your solution in a piece of paper, take a picture and upload your file. IMPORTANT: typed solutions will not be accepted! This is the foreign exchange market of euro. Using the information below, answer the following: Draw the supply x demand graph for euro and indicate the equilibrium exchange rate (in order to get full credit you must label the graph and curves correctly when drawing your graph). Suppose the supply of euro doubles. Draw the new supply curve (in the graph you drew on part (a) and indicate the new equilibrium exchange rate. With this new exchange rate, has the dollar appreciated or depreciated? Justify you answer! With this new exchange rate, what happens to US imports of European goods? Justify your answer!