During a given time period, The Euro went from $1.25/Euro to $1.50/Euro. Both th

Question

During a given time period, The Euro went from $1.25/Euro to $1.50/Euro. Both the USA and Euro central banks agreed to reverse this trend. Their combined action will mean that the for Euro will. a) supply;increase; b) demand;increase; c) supply;decrease; d) demand;decrease; 38) If the chinese government increased the tariff on items exported by USA to china,then the of FX will a) demand;increase; b) supply;decrease; c) supply;increase; d) demand;decrease; 39) Increasing desire by foreigners for USA made products will lead to an increase in of FX in the foreign exchange market a) Demand b) supply.

Explanation / Answer

1. In the given example Euro went stronger. To reverse the trend Eurp needs to be depreciated. So the Supply for Euro will Increase.

Option a. is correct.

2. When Chinese Govt increases tariff on goods exported by USA, the import from USA will be reduced as it will become costly. So less USd will be required for imprt bill payment. Therefore demand for FX will decrease.

3. When foreigners' demand for USA made goods increase, the payment for import from USA will increase and as the payments to be made in USD, the demand for USD will increase in the FX market.

Option a is correct.

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