On a graph of the foreign exchange market for U.S. dollars, with the horizontal axis measuring the quantity of dollars available for foreign exchange and the vertical axis measuring the exchange rate in euros per dollar, as the dollar appreciates against the euro, the _____ to the foreign exchange market would _____.
A) quantity of dollars supplied; decrease
B) supply of dollars; increase
C) supply of dollars; decrease
D) quantity of dollars supplied; increase

Question

Quizplus · Accepted Answer

When the dollar appreciates against the euro, it means that each dollar can buy more euros than before. This makes holding dollars more attractive, leading to an increase in the quantity of dollars supplied in the foreign exchange market as people are more willing to exchange their dollars for euros.

On a Graph of the Foreign Exchange Market for U