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Part I

Question 1. Analyze the concept of exchange rate:

Question 2. Explain how the dollar price of euros is determined.

Question 3. Identify a factor that can increase the dollar price of euros.

Question 4. Identify a factor that can decrease the dollar price of euros.

Question 5. Explain why a rise in the dollar price of euros means a fall in the euro price of dollars.

Question 6. Explain the purchasing-power-parity theory of exchange rates, using the euro-dollar exchange rate as an example.

Part II

Question 1. Explain why a quota is more detrimental to an economy than a tariff that results in the same level of imports as the quota.

Question 2. What is the net outcome of either tariffs or quota for the world economy?

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