Refer to Figure 20.2 for the following questions.
Figure 20.2
-Refer to Figure 20.2.Suppose that interest rates in Australia fall relative to those in the European Union.Assuming all else remains constant,how would this be represented?
A) Supply would decrease, demand would decrease, and the economy moves from B to C to D.
B) Supply would increase, demand would decrease, and the economy moves from C to B to A.
C) Supply would decrease, demand would increase, and the economy moves from A to D to C.
D) Supply would increase, demand would increase, and the economy moves from D to A to B.

Question

Refer to Figure 20.2 for the following questions.
Figure 20.2 
-Refer to Figure 20.2.Suppose that interest rates in Australia fall relative to those in the European Union.Assuming all else remains constant,how would this be represented?
A) Supply would decrease, demand would decrease, and the economy moves from B to C to D. 
B) Supply would increase, demand would decrease, and the economy moves from C to B to A. 
C) Supply would decrease, demand would increase, and the economy moves from A to D to C. 
D) Supply would increase, demand would increase, and the economy moves from D to A to B.

Quizplus · Accepted Answer

A fall in interest rates in Australia relative to those in the European Union would result in an increase in the supply of Australian dollars (due to more attractive investment opportunities in the EU), a decrease in demand for Australian dollars (as investors prefer the higher interest rates in the EU), and a movement along the curve from point C to B to A.

Refer to Figure 20.2 for the Following Questions