Figure 6-2

-Suppose that the supply of euros is at point C in Figure 6-2 above and Europe only trades with the United States.We would conclude that ________ in the United States prefer ________ goods at ________ $ per euros.

Question

Figure 6-2
 
-Suppose that the supply of euros is at point C in Figure 6-2 above and Europe only trades with the United States.We would conclude that ________ in the United States prefer ________ goods at ________ $ per euros.

Quizplus · Accepted Answer

Point C represents the equilibrium exchange rate where the supply of euros equals the demand for euros. If Europe only trades with the United States, then point C represents the exchange rate that allows for balance of trade between Europe and the United States. Since the supply of euros is at point C, it means that the United States prefers European goods at a lower price, which is represented by a higher value of the dollar in terms of euros (lower price per euro). Therefore, the correct answer is A, where U.S. citizens prefer European goods at $0.12 per euro.

Figure 6-2 -Suppose That the Supply of Euros Is at Point C