Read the BusinessWeek article “The Swiss Franc Soars, and Tourism Suffers (Links

Question

Read the BusinessWeek article “The Swiss Franc Soars, and Tourism Suffers (Links to an external site.)Links to an external site.” dated Oct 7, 2010.

According to the article, the Swiss franc has _____________________ (appreciated/depreciated) against the euro and the US dollar, and this has made the prices is Switzerland much __________________ (higher/lower) for American tourists.

An AS-AD analysis would confirm what the article says: that the indicated change in the value of the franc is making inflation (change in general P) in Switzerland _______________ (high/low). That’s because Switzerland’s NX __________________ (increases/decreases), driving AD to the _____________ (right/left).

Explanation / Answer

The Swiss Franc has "Appreciated" against Euro and the US Dollar.

This has made the price in Switzerland "higher" for American tourists.

The change in the value is making inflation in Switzerland "low", That's because Switzerland's NX "decreases" driving the AD to the "left".

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