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

Question

Quizplus · Accepted Answer

Ceteris paribus, an increase in the U.S. demand for Greek goods will generate an increase in the demand for euros as Americans will demand more euros to buy Greek goods. Therefore, the demand curve for dollars will shift to the left, from D1 to D2, resulting in a movement from point M to N. This will cause an appreciation in the euro's value against the dollar, making each euro more expensive. Therefore, option B is the correct answer. Options A, C, and D are incorrect because they do not accurately depict the effects of the increase in the U.S. demand for Greek goods.

Ceteris Paribus, an Increase in the U