Suppose the expected export demand for the US goods has fallen (say due to potentially intensifying trade war). What are the implications of this expected future change on the current exchange rate? Draw the diagram and explain.

The export supply curve would shift upward as the demand for the exported goods will decrease, the supply of goods will decrease and the price of goods will increase (become more expensive to export). As a result of the trade war intensifying, the future of the exchange rate will increase as the market for exporting goods will become more volatile in trade. When the supply of goods decrease, it pushes up the price to purchase the export goods and will have a negative impact on the rate at which the exported goods are exchanged at. That means the exchange rate (like taxes and levies on export) will increase in price.

Explanation:

To understand this concept, you have to understand the definition of an export supply curve. An export supply curve is the value of the difference of the quantity to supplied (produced) to export less the the quantity demanded by consumers (who want imported goods).

Refer to the illustrated graph attached to understand the above information.

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