What would you expect each of the following developments to do to the price of dollars in euros?
a. The incoming Biden administration eliminates the tariffs that had been imposed by the
Trump administration on goods from the European Union (while the EU does not
change its trade policy).
b. Large budget deficits in the Europe cause the real interest rate in Europe to rise relative
to that in the United States.
c. Inflation is lower in the United States than in Europe.
d. There is a shift in European tastes toward American goods.
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