ssume that the U.S. inflation rises while British inflation is unchanged. Explain the effect of this change in relative U.S.-U.K. inflation on the U.S. exports to and imports from U.K., U.S. current account balance, demand for and supply of British pounds, and the exchange rate of of dollar/pound (i.e., appreciation or depreciation). Limit your answers to no more than ten sentences

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Question #1. Assume that the U.S. inflation rises while British inflation is unchanged. Explain the effect of this change in relative U.S.-U.K. inflation on the U.S. exports to and imports from U.K., U.S. current account balance, demand for and supply of British pounds, and the exchange rate of of dollar/pound (i.e., appreciation or depreciation). Limit your answers to no more than ten sentences.

Question #2. Assume that the U.S. interest rate rises while U.K. interest rate is unchanged. Explain the effect of this macroeconomic event on the U.K. (U.S.) foreign investments in financial assets of U.S. (U.K.), U.S. capital account balance, demand for and supply of British pounds, and the exchange rate of of dollar/pound. Limit your answers to no more than ten sentences.

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