Question: Analyze the concept of exchange rate:
1. Explain how the dollar price of euros is determined.
2. Identify a factor that can increase the dollar price of euros.
3. Identify a factor that can decrease the dollar price of euros.
4. Explain why a rise in the dollar price of euros means a fall in the euro price of dollars.
5. Explain the purchasing-power-parity theory of exchange rates, using the euro-dollar exchange rate as an example.
6. Explain why a quota is more detrimental to an economy than a tariff that results in the same level of imports as the quota.
7. What is the net outcome of either tariffs or quota for the world economy?