Suppose There Is an Increased Demand from Foreign Countries for Iowa

question 145

Essay

Suppose there is an increased demand from foreign countries for Iowa pork.
a. What happens to the U.S. dollar exchange rate in a flexible foreign currency market? Illustrate your answer with a graph of the U.S. dollar market.
b. Explain how a free-floating exchange rate acts as a buffer to insulate an economy, say, Canada's economy, from the impact of this event.

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Definitions:

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