Suppose the president of the united states announces a new set of reforms that includes a new anti-inflation program. assuming the announcement is believed by the public, what will happen to the exchange rate for the u. s. dollar?

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Leah Villanueva

Business

28 February, 17:23

Suppose the president of the united states announces a new set of reforms that includes a new anti-inflation program. assuming the announcement is believed by the public, what will happen to the exchange rate for the u. s. dollar?

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Makayla · Answer 1

The dollar will appreciate. Because expected U. S. inflation falls as a result of the announcement, there will be an expected appreciation of the dollar and so the expected return on dollar assets will rise. As a result, the demand curve will shift to the right and the equilibrium value of the dollar will rise.