In order to import German goods into the United States, U.S. importers must buy those goods with German money, i.e., Euros. Assume, all else constant, there is a decrease in the price of U.S.-made cars compared to the price of German cars. Based on this information, we can conclude, with certainty, that in the market for Euros where the price of Euros is measured in dollars), this would cause:

Question

Quizplus · Accepted Answer

A decrease in the price of U.S.-made cars compared to German cars would likely lead to a decrease in demand for German cars, reducing the demand for Euros. This would cause a decrease in the equilibrium price of Euros.

In Order to Import German Goods into the United States