a. Generally speaking, the dollar price of euros is determined in a currency exc
ID: 1114064 • Letter: A
Question
a. Generally speaking, the dollar price of euros is determined
in a currency exchange market that equates the supply of euros with the demand for euros.
by the World Trade Organization (WTO).
by the European Union (EU).
in a currency exchange market that equates the supply of euros with the demand for dollars.
b. The dollar price of euros might increase if
the demand for euros increased or the supply of euros decreased.
the demand for euros decreased or the supply of euros increased.
there was an increase in European purchases of large U.S. aircraft.
there was a decrease in U.S. purchases of large European aircraft.
c. The dollar price of euros might decrease if
the demand for euros decreased or the supply of euros increased.
there was an increase in U.S. purchases of large European aircraft.
the demand for euros increased or the supply of euros decreased.
there was a decrease in European purchases of large U.S. aircraft.
d. Consider the following statement: “A rise in the dollar price of euros necessarily means a fall in the euro price of dollars.” This statement is
false, because if it takes more dollars to purchase one euro, then it takes more euros to buy a dollar.
true, because if it takes more dollars to purchase one euro, then it takes more euros to buy a dollar.
true, because if it takes more dollars to purchase one euro, then it takes fewer euros to buy a dollar.
false, because if it takes more dollars to purchase one euro, then it takes fewer euros to buy a dollar.
e. Consider the following: The dollar price of a Big Mac in the United States is $3.50. The euro price of this same good in Germany is 1.75 euros. Purchasing power parity suggests that
$0.5 = 1 euro
$1 = 0.5 euros
$1 = 1 euro
$1 = 2 euros
Explanation / Answer
a.
in a currency exchange market that equates the supply of euros with the demand for euros.
the above is the answer
b.
the demand for euros increased or the supply of euros decreased.
the above is the answer
c.
the demand for euros decreased or the supply of euros increased.
the above is the answer
d.
true. If it takes more dollars to purchase one euro, it takes fewer euros to buy a dollar.
the above is the answer
e.
$1 = 0.5 euros
the above all are the answers
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