Question Details

Analysts commonly attribute the appreciation of a currency 



1.	National Income Effects. Analysts commonly attribute the appreciation of a currency to expectations that economic conditions will strengthen.  Yet, this chapter suggests that when other factors are held constant, increased national income could increase imports and cause the local currency to weaken.  In reality, other factors are not constant.  What other factor is likely to be affected by increased economic growth and could place upward pressure on the value of the local currency?


2. Factors Affecting Exchange Rates. If the Asian countries experience a decline in economic growth (and experience a decline in inflation and interest rates as a result), how will their currency values (relative to the U.S. dollar) be affected?



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