Epsilon is a country whose unit of currency is the omega. New information leads people to expect that the omega will appreciate next year. The demand curve for omegas shifts , the supply curve of omegas shifts _ , and the omega _ _.

Question

Quizplus · Accepted Answer

When people expect that a currency will appreciate, their willingness to pay for that currency increases, leading to a rightward shift in the demand curve for the omega. This increases the equilibrium price and quantity of omegas. However, the supply curve of omegas will shift leftward because suppliers will want to hold onto their currency in anticipation of higher exchange rates, which reduces the quantity of omegas supplied at any given price. As a result, the omega appreciates. Therefore, choice C is the best answer.

Epsilon Is a Country Whose Unit of Currency Is the Omega