Suppose that prices in France increase by 8 percent while prices in the United States remain relatively stable.We would expect that (on the foreign exchange market)the demand for U.S.dollars will __________ and the supply of U.S.dollars will __________.

Question

Quizplus · Accepted Answer

When prices in France increase, U.S. goods become relatively cheaper, leading to an increase in demand for U.S. dollars to purchase these goods. Simultaneously, the supply of U.S. dollars decreases as fewer people want to buy the now more expensive French goods.

Suppose That Prices in France Increase by 8 Percent While