The following diagram is a flexible exchange market for foreign currency: Other things equal,a leftward shift of the demand curve would:

Question

The following diagram is a flexible exchange market for foreign currency:  Other things equal,a leftward shift of the demand curve would:

Quizplus · Accepted Answer

A leftward shift in the demand curve means that buyers are willing to purchase a smaller quantity of euros at each price level. As a result, the equilibrium quantity of euros will be reduced, leading to a lower quantity of euros being exchanged for dollars. This will cause the euro to appreciate (become more expensive relative to the dollar) and not result in a shortage of euros, as there is excess supply of euros at a higher price level. The dollar will depreciate as it can purchase fewer euros at each level of exchange.

The Following Diagram Is a Flexible Exchange Market for Foreign