Other things equal, an expected depreciation in the euro will lead to:
A)an inflow of capital to Europe.
B)an increase in official exchange market intervention by the euro area monetary authorities.
C)a lowering of exports of European goods and services.
D)a decrease in the demand for euro-denominated financial assets.

Question

Quizplus · Accepted Answer

When the euro is expected to depreciate, investors may be less likely to invest in euro-denominated financial assets as their value may decrease with the depreciation. This would result in a decrease in demand for euro-denominated financial assets.

Other Things Equal, an Expected Depreciation in the Euro Will