An increase in the world relative demand for U.S. output causes
A) a short-run real depreciation of the dollar against the euro.
B) a long-run real appreciation of the dollar against the euro.
C) a long-run real depreciation of the dollar against the euro.
D) a short-run real appreciation of the euro against the dollar.
E) a long-run real appreciation of the euro against the dollar.

Question

Quizplus · Accepted Answer

An increase in the world relative demand for U.S. output would lead to a long-run real appreciation of the dollar against the euro, as more people or entities would need dollars to buy U.S. goods and services, increasing the value of the dollar relative to the euro.

An Increase in the World Relative Demand for U