1 – 8. (2 points each; 16 points total) These questions ask you to consider different factors which might influence the value of the U.S. dollar vs. the Euro. Assume that both the U.S. and “Eurozone” countries (e.g., the group of EU countries that use the Euro) are 1) both “large countries” in foreign currency markets and thus can influence each others’ currency values, and 2) both have market‐determined currency values. Each of the changes below will result in either an appreciation or depreciation of the U.S. dollar versus the Euro. Indicate, with (a) = appreciation, or (b) = depreciation, what happens to the U.S. dollar’s value relative to the Euro as a result. (Note: in each case, assume that other determinants and the values of other currencies are unchanged).
a = Appreciation of US$ vs. Euro (€)
b = Depreciation of US$ vs. Euro (€)
Question: Eurozone countries impose severe new import restrictions as part of their pursuit of more protectionist trade policies.
Group of answer choices
(a)
(b)
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