The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2

-If interest rates in Europe fall below interest rates in the United States, then, other things equal, the demand for euros will decrease.

Question

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2
 
-If interest rates in Europe fall below interest rates in the United States, then, other things equal, the demand for euros will decrease.

Quizplus · Accepted Answer

When interest rates in Europe fall below those in the United States, investors are likely to find U.S. assets more attractive due to higher returns, leading to a decrease in demand for euros as investors exchange euros for dollars to invest in the U.S.

The Figure Given Below Depicts the Foreign Exchange Market for British