Which of the following events is likely to result in an increase of the exchange rate? Check all that apply. The British government invites U.S. firms to invest in British oil fields. Fears of terrorism reduce U.S. tourism in the United Kingdom. The rate of productivity growth in Britain decreases sharply. An economic boom occurs in the United Kingdom that induces British consumers to purchase more U.S.-made autos, trucks, and computers.

Exchange rate is defined as the rate at which one currency can be exchanged for another. This is an important consideration in international trade. For example a good worth $100 may be equivalent of £150. If exchange rate is not considered it will lead to an imbalance of profit and loss between parties involved.

The currency of the UK will weaken against that of the USA if fear of terrorism reduces US tourism to the UK, rate of productivity declines, and when UK consumers purchase more of USA automobiles.

Basically when there is less demand for a countrie's currency it weakens against others and exchange rate falls.

jepessoa jepessoa · Answer 2 · 2025-03-27T07:56:48-04:00

Answer:

The British government invites U.S. firms to invest in British oil fields. THIS WILL INCREASE THE AMOUNT OF BRITISH POUNDS DEMANDED BY AMERICAN OIL FIRMS WHICH WILL APPRECIATE THE PRICE OF THE BRITISH POUND AGAINST THE US DOLLAR.

Explanation:

The currency exchange or the relative price of a currency vs another foreign one is determined by the supply and demand of both currencies. When the demand of one currency increases, the value of that currency will increase compared to the value of the other one.

This options are wrong because:

Fears of terrorism reduce U.S. tourism in the United Kingdom. DECREASE THE AMOUNT OF BRITISH POUNDS PURCHASED BY AMERICAN TOURISTS, THEREFORE, THE BRITISH POUND WILL DEPRECIATE AGAINST THE US DOLLAR.
The rate of productivity growth in Britain decreases sharply. AS PRODUCTIVITY DECREASES IN GREAT BRITAIN, ITS CURRENCY WILL DEPRECIATE AGAINST ALL FOREIGN CURRENCIES.
An economic boom occurs in the United Kingdom that induces British consumers to purchase more U.S.-made autos, trucks, and computers. THIS WILL INCREASE THE DEMAND OF US DOLLARS, WHICH IN TURN WILL DEPRECIATE THE BRITISH POUND AGAINST THE US DOLLAR.