Question

Will give crown! Which of the following correctly explains how the dollars-per-euro exchange rate will change in the near future if the exchange rate is expected to rise?
A. The expectation of an appreciation euro increases the demand for euros and decreases the supply of euros on the foreign exchange market.The result is a higher exchange rate in the near future.

B. The expectation of an appreciation euro increases the supply of euros and decreases the demand for euros on the foreign exchange market. The result is a lower exchange rate in the near future.

C. The expectation of an appreciation euro increases the demand for euros and decreases the supply of euros on the foreign exchange market. The result is a lower exchange rate in the near future.

D. The expectation of an appreciation euro increases the supply of euros and decreases the demand for euros on the foreign exchange market. The result is a higher exchange rate in the near future.

Answer 1

The  correct statement is: A. The expectation of an appreciation euro increases the demand for euros and decreases the supply of euros on the foreign exchange market. The result is a higher exchange rate in the near future.

Exchange rate

In a situation were the exchange rate is expected to rise appreciation  euro will tend to increase which will in turn will lead to more demand for Euro.

When there high demand for Euro, the supply for Euro will tend to reduce on the foreign exchange  market based on the fact  that exchange rate is often determine by the foreign exchange market.

Therefore the correct option is A.

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