All else being equal, if Asian restaurants switch from serving French champagne to serving California wines, then the market equilibrium value of the exchange rate for the U.S. dollar will:
A)rise.
B)fall.
C)become fixed.
D)either rise or fall depending on whether the supply or demand for dollars changes more.

Question

Quizplus · Accepted Answer

If Asian restaurants reduce their demand for French champagne and switch to U.S. wine, the restaurants need fewer euros and more dollars. This increases world demand for dollars and the exchange rate for the U.S. dollar will rise.

All Else Being Equal, If Asian Restaurants Switch from Serving