The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2

-In the foreign exchange market where French francs are traded for Japanese yen, a decrease in the interest rate in France is most likely to cause:
A)a decrease in the yen price of the French franc.
B)an increase in the interest rate in Japan.
C)an increase in the yen price of the French franc.
D)an increase in the demand for French francs.
E)an increase in the supply of yen.

Question

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2
 
-In the foreign exchange market where French francs are traded for Japanese yen, a decrease in the interest rate in France is most likely to cause:
A)a decrease in the yen price of the French franc. 
B)an increase in the interest rate in Japan. 
C)an increase in the yen price of the French franc. 
D)an increase in the demand for French francs. 
E)an increase in the supply of yen.

Quizplus · Accepted Answer

EA decrease in the interest rate in France makes holding French francs less attractive, leading to a decrease in demand for francs (A), which in turn increases the supply of yen as investors sell francs to buy yen (E).

The Figure Given Below Depicts the Foreign Exchange Market for British