Which of the following will shift the demand for the euro to the right?
A)an increase in interest rates in the European Union
B)an increase in incomes in countries that buy goods from the European Union
C)expectations among speculators that the price of the euro will rise in the future
D)the issue of new shares in BMW to Canadians
E)All of the above will shift the demand for the euro to the right.

Question

Quizplus · Accepted Answer

Each of the options provided leads to an increase in demand for the euro. An increase in interest rates in the EU makes euro-denominated assets more attractive, boosting demand for the euro. Higher incomes in countries that import goods from the EU increase their purchasing power, leading to more imports from the EU and thus higher demand for the euro. Expectations of a price rise in the euro encourage speculators to buy euros now, increasing demand. Lastly, issuing new shares of a European company (like BMW) to Canadians would require them to purchase euros to buy the shares, again increasing demand for the euro.

Which of the Following Will Shift the Demand for the Euro