Ceteris paribus,an increase in the U.S.demand for Greek goods in Figure 36.1 will

Question

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An increase in U.S. demand for Greek goods would increase the demand for euros, as American consumers would need euros to purchase the Greek goods. This would shift the demand curve for dollars to the left, from M to N, resulting in a higher exchange rate (price of euros) in dollar terms. Option A is incorrect because there is no movement along a supply curve in response to changes in demand. Option C is incorrect because we do not know the specific exchange rate before or after the increase in U.S. demand for Greek goods. Option D is also incorrect because the question is asking about the effect on the U.S.-Greek trade relationship, not about the impact on Greek residents.

Ceteris Paribus,an Increase in the U