If the European Central Bank increases interest rates,
A) the demand curve for European euros and the demand curve for U.S. dollars both shift rightward.
B) the demand curve for European euros shifts leftward and the supply curve of European euros shifts rightward.
C) only the demand curve for European euros shifts rightward.
D) the demand curve for European euros shifts rightward and the supply curve of European euros shifts leftward.

Question

Quizplus · Accepted Answer

When the European Central Bank increases interest rates, European assets become more attractive, increasing demand for euros (shifting the demand curve rightward) and decreasing the supply of euros as fewer people want to sell euros (shifting the supply curve leftward).

If the European Central Bank Increases Interest Rates