Use the graph below to answer questions 17- 20.
Figure 1.2
-Refer to Figure 1.2.Suppose that the market for euro is initially in equilibrium at point A with the exchange rate $2.00 per euro.Which of the following could shift the supply for euro from S₁ to S₂?

Question

Use the graph below to answer questions 17- 20.
Figure 1.2

-Refer to Figure 1.2.Suppose that the market for euro is initially in equilibrium at point A with the exchange rate $2.00 per euro.Which of the following could shift the supply for euro from S₁ to S₂?

Quizplus · Accepted Answer

If Germans want to buy American goods more than before, they will need to exchange more euros for dollars to buy the American goods. This will increase the demand for dollars, leading to a decrease in the demand for euros. As a result, the supply of euros will shift to the right from S₁ to S₂, causing the exchange rate to depreciate from $2.00 per euro to a lower value.

Use the Graph Below to Answer Questions 17- 20