Oral Practice. Work with a partner and discuss these comprehension questions on text 9.4

1. What does the downsloping demand for pounds indicate, as shown by DD (Figure 9.1)?

2. In what way can the falling of the supply of currency (pounds) be explained? (The straight

Line SS in Figure 9.1).

If the dollar depreciates vis-a-vis the pound, what does it mean to the pound under the system

of freely floating exchange rates?

Can technological or design advances in the production of goods influence the national exchange

rate under the system of freely floating exchange rates?

5. Do a country’s imports vary with its level of income, and how does it tell upon its national

exchange rate under the system of freely floating exchange rates?

If the domestic price level rises rapidly, what influence will it have on the national exchange

rate under the system of freely floating exchange rates?

7. What is the influence of real interest rates adjusted for the rate of inflation on the exchange rate?

Speculators act on the supposition that changes in currency values will probably happen. How

Does it tell upon the real exchange rate of the national currency under the system of freely

floating exchange rates?

9. Are there any risks and uncertainties associated with flexible exchange rates?