Question

A decrease in U.S. interest rates relative to French interest rates would likely ____ the U.S. demand for euros and ____ the supply of euros to be exchanged for dollars.

Answer 1

Currency serves as a medium of transaction, a decrease in U.S. interest rates relative to French interest rates would increase in the U.S demand for euros and the decrease in the supply of euros to be exchanged for dollars.

What is currency?

Currency is a medium of exchange for goods and services also called money. It could be in form of paper or coins and it is usually issued by a government.

When there is a decrease in the interest rate of a particular country it will lead to an increase in demand from other countries and an increase in the demand for such nations or country's currency.

Therefore, A decrease in U.S. interest rates relative to French interest rates would likely increase the U.S. demand for euros and decrease the supply of euros to be exchanged for dollars.

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