Question

2. For each of the below scenarios involving the euro and the dollar, one currency has...

2. For each of the below scenarios involving the euro and the dollar, one currency has an increase in supply, the other an increase in demand. Tell which. Be sure to include whether each currency rises or falls in value.

More European tourists come to the US for vacations.

                                       

US interest rates fall significantly.

The euro increases in international acceptance as a currency of business.

The US economy outperforms most of the developed world.

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Answer #1

More European tourists come to the US for vacations.
Increase in demand for dollars
Increase in supply of Euros
Dollar appreciates and Euro depreciates

US interest rates fall significantly.
Increase in demand for Euros
Increase in supply for dollars
Euro appreaciates and dollar depreciates

The euro increases in international acceptance as a currency of business.
Increase in demand for Euros
Increase in supply for dollars
Euro appreaciates and dollar depreciates

The US economy outperforms most of the developed world.
Increase in demand for dollars
Increase in supply of Euros
Dollar appreciates and Euro depreciates

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