Sia
Question
Statistics
Posted 10 months ago
France and the United States are trading partners. France's currency is the euro and the United States' currency is the dollar.
Which of the following would definitely lead to an appreciation of the dollar?
Choose 1 answer:
(A) The supply of the dollar increases
(B) The demand for the dollar increases
(C) The supply of the euro decreases
(D) The demand for the euro increases.
(E) The supply of the euro decreases and the demand for the dollar decreases.
Sign in to unlock the answer
Answer from Sia
Posted 10 months ago
Solution by Steps
step 1
To understand how the exchange rate between two currencies is affected, we need to consider the basic principles of supply and demand
step 2
An appreciation of the US dollar means that the value of the dollar increases relative to the euro. This can happen if the demand for dollars increases or if the supply of euros increases, making euros less scarce relative to dollars
step 3
Reviewing the options given, we need to identify which scenario would increase the demand for the dollar or increase the supply of the euro
step 4
Option A suggests an increase in the supply of the dollar, which would typically lead to a depreciation of the dollar, not an appreciation
step 5
Option B suggests an increase in the demand for the dollar, which would lead to an appreciation of the dollar
step 6
Option C suggests a decrease in the supply of the euro, which could lead to an appreciation of the euro, not the dollar
step 7
Option D suggests an increase in the demand for the euro, which would lead to an appreciation of the euro, not the dollar
step 8
Option E suggests a decrease in the supply of the euro and a decrease in the demand for the dollar, which would have conflicting effects and is not a clear scenario for the appreciation of the dollar
Answer
The correct answer is the one that would definitely lead to an appreciation of the US dollar, which is when the demand for the dollar increases.
B
Key Concept
Currency Appreciation and Demand
Explanation
The value of a currency appreciates when the demand for it increases relative to its supply.
Not the question you are looking for? Ask here!
Enter question by text
Enter question by image
Unlock Smarter Learning with AskSia Super!
Join Super, our all-in-one AI solution that can greatly improve your learning efficiency.
30% higher accuracy than GPT-4o
Entire learning journey support
The most student-friendly features
Study Other Question