If the Federal Reserve decides to buy euros from the foreign exchange market, a likely result will be:

Question

Quizplus · Accepted Answer

When the Federal Reserve buys euros from the foreign exchange market, they increase the demand for euros, which causes the exchange value of the U.S. dollar to decrease. Therefore, C is the correct answer. A leftward shift of the demand curve for euros (A) or a rightward shift of the supply curve for euros (D) would not occur in this scenario. Similarly, a leftward shift of the supply curve for euros (E) would not be likely in this situation as the supply is fixed in the short run.

If the Federal Reserve Decides to Buy Euros from the Foreign