Problem
1. Why does the foreign exchange market move toward equilibrium when the foreign exchange rate for the dollar is either above or below its equilibrium value?
2. Identify three factors that could cause the exchange rate for a currency to rise.
3. What are the short-run effects on aggregate output and the inflation rate when the domestic currency appreciates or depreciates?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.