manufacturing) and other means ons 6. Reread the Country Focus on the U.S. dolla

Question

manufacturing) and other means ons 6. Reread the Country Focus on the U.S. dollar, oil prices, and recycling petrodollars, then answer the following questions: a. What will happen to the value of the U.S. dollar if oil producers decide to invest most of their earnings fiom oil sales in domestic infrastructure projects? b. What factors determine the relative attractiveness of dollar-, euro-, and yen- denominated assets to oil rs flush with petrodollars? What might lead them to direct more funds toward non-dollar- denominated assets? c. What will happen to the value of the U.S. dollar if OPEC members decide to invest more of their petrodollars toward non-dollar-denominated assets, such as euro-denominated stocks and bonds? d. In addition to oil producers, China is also accumulating a large stock of dollars, currently estimated to total $3.3 trillion. What would happen to the value of the dollar if China and oil-producing nations all shifted out of dollar-denominated assets at the same time? What would be the consequence for the U.S. economy? e International Monetary System Mo 319 Chapter Eleven The

Explanation / Answer

Incase oil producers as well as investors in China are cautiously investing in other assets and they are taking their investment out of a dollar denominated assets, this will simply reduce the demand for dollars in the international market for foreign exchange. There will be a downward pressure on the United States dollar to depreciate. In the short run there might be positive net exports but the business pessimism towards the United States and its financial environment will not be beneficial for the United States in particular and world economy in general.

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.