Question
In AP Macroeconomics, following question: Suppose Europeans began purchasing real assets in the United States. How would this impact the foreign exchange market for the
In AP Macroeconomics, following question:
Suppose Europeans began purchasing real assets in the United States. How would this impact the foreign exchange market for the euro and the U.S. dollar price of the euro?
Supply of euro / U.S. dollar Price of euro
A. Increase / Increase
B. Increase / Decrease
C. Decrease / Increase
D. Decrease / Decrease
E. Decrease/ Not Change
According to Coursehero Expert answer is C. Decrease/Increase. But this seems incorrect. As purchasing of real assets in US will increase demand of US dollars, as these assets will be need to be purchased in USD. So, USD will appreciate and hence US dollar price of euro will INCREASE. However, in the foreign exchange market, more euros will needs to be supplied. So that should increase the Supply of Euro. Sn answer should be A. INCREASE/INCREASE. Is that not correct?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
International Marketing And Export Management
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr
8th Edition
1292016922, 978-1292016924
