ECONOMIC TEST QUESTION!
(Worth 10 points!) *will mark brainliest*
#15
Suppose Britain experiences unusually strong GDP growth and a rapid increase in its Consumer Price Index (CPI). Answer the following questions about what would most likely result:
Note: the British currency is called the pound.
· What specific monetary policy action would Britain’s central bank – their “Fed” – take?
· How would American investors react to the Bank of England’s action?
· How would the Americans’ actions impact the foreign exchange market? Explain what happens to both currencies and use the proper vocabulary.
· How would the changes in the foreign exchange market affect John, the owner of a British hotel who usually has many American guests?
· How would the changes in the foreign exchange market affect the American balance of trade?
