The demand curve for euros in the foreign exchange market will increase (shift rightward) if
A) European interest rates fall relative to foreign interest rates.
B) the current exchange value of the euro depreciates.
C) Europe increases tariffs and applies more stringent quotas on imported goods.
D) the rate of inflation in Europe is less than the rate of inflation throughout the world.

Question

Quizplus · Accepted Answer

If the rate of inflation in Europe is less than the rate of inflation throughout the world, European goods become relatively cheaper, increasing demand for euros to purchase these goods, thus shifting the demand curve for euros to the right.

The Demand Curve for Euros in the Foreign Exchange Market