-In the above figure, suppose the value of the European euro is P1 and U.S. demand for French wine declines. The effect on the euro can be shown by
A) an increase in the value of the euro to P2.
B) the excess demand of euro equal to Q3 - Q1.
C) the decrease in the value of the euro to P0.
D) a shift in the demand for euros from D1 to D0, but no change in the value of the euro.

Question

-In the above figure, suppose the value of the European euro is P1 and U.S. demand for French wine declines. The effect on the euro can be shown by
A) an increase in the value of the euro to P2. 
B) the excess demand of euro equal to Q3 - Q1. 
C) the decrease in the value of the euro to P0. 
D) a shift in the demand for euros from D1 to D0, but no change in the value of the euro.

Quizplus · Accepted Answer

When U.S. demand for French wine declines, there is less need for euros to buy that wine, leading to a decrease in the value of the euro to P0 due to reduced demand for the currency.

-In the Above Figure, Suppose the Value of the European