Explanation The export of goods and services and the import of the goods and services between different countries form international trade. When the US sells a good to another country, it is an export and when it is the purchase of a commodity or service from the other country by the US, it is an import. While exporting, the purchasing country should pay the US; the importing countries pay the currency equivalent to the domestic currency for the imports. Thus, the exporter receives the importer’s currency in exchange for the trade, which can be used to pay for the imports from them. Thus, it is said that exports earn supply of foreign currencies that can be used by people to make imports. The exchange of the goods and services takes place in normal markets. The trading of the currencies cannot be done in such markets and there is an over-the-counter market for the purpose of the sale of such currencies. The different currencies are bought and sold here in this market. They are known as the foreign exchange markets. The market determines the exchange rate of the economy. Option (a): The air-lines are produced in France, which is a member of the European Union. When the US makes a demand for the air-lines made in France, it will lead to increased imports of air-lines to the US. Thus, the US has to pay France in their currency. Since France is a member of the European Union, they use the Euro as it is their international currency. The increase in the exports of air-lines by France will lead to the increase in the demand for the Euro in the foreign exchange market. Option (b): The auto manufacturer is based in Germany, which is a member of the European Union (which uses Euro as their official currency). When the firm makes a plant in the place in the US, the firm has to purchase the US dollar (or supply the Euro) in order to get the required land, machinery, as well as the other factors of production from the US. As a result, the decision will lead to an increase in the supply of Euro in the exchange market. Option (c): Paris is a place which is located in France. Thus, when the student wants to stay in France, she has to keep the currency of France in order to make her day-to-day transactions. For this purpose, she has to get the Euro from the exchange market by providing dollars there...

The demand for and supply of Euros.

EBK MACROECONOMICS

21st Edition

ISBN: 8220103959902

Author: McConnell

Publisher: YUZU

See similar textbooks

Question

Chapter 21, Problem 2DQ

To determine

The demand for and supply of Euros.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 21, Problem 1DQ

Chapter 21, Problem 3DQ

Students have asked these similar questions

simple steps on how it should look like on excel

Consider options on a stock that does not pay dividends.The stock price is $100 per share, and the risk-free interest rate is 10%.Thestock moves randomly with u=1.25and d=1/u Use Excel to calculate the premium of a10-year call with a strike of $100.

Compute the Fourier sine and cosine transforms of f(x) = e.

Knowledge Booster

Similar questions

SEE MORE QUESTIONS

Recommended textbooks for you

Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:9781285165912
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou...
Economics
ISBN:9781285165875
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...
Economics
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc
Principles of Economics 2e
Economics
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:OpenStax
Economics:
Economics
ISBN:9781285859460
Author:BOYES, William
Publisher:Cengage Learning