Question

Suppose Czech businessmen began purchasing American properties. How would this impact the foreign exchange market for the koruna and the dollar? How would the changing value of the dollar impact American exports?
U.S. dollar / Czech koruna / Exports
A. Appreciate / Appreciate / Decrease
B. Appreciate / Depreciate / Decrease
C. Appreciate / Depreciate / Increase
D. Depreciate / Appreciate / Decrease
E. Depreciate / Appreciate / Increase

Answer 1

Answer:

B. Appreciate / Depreciate / Decrease

Explanation:

If the businessmen want to purchase some American Properties them will need to exchange the Koruna by the Dollar, it means Sell Koruna to buy dollar,which is,  increase the Koruna supply and increase the demand by dollars.

It exchange will appreciate the dollar value because of an increase in the Dollar demand as the supply keeps at the same level.

While the Czech Koruna will see its price decrease because of the increase in the supply of Koruna while the demand of Koruna keeps at the same level,

In the meantime, the American Export see their market negatively affected by the increase in the dollar price, as the dollar increase its value and will be more difficult to the Americens sell their products to the rest of the world, because others countries need more money for each dollar.