Assume That U

Multiple Choice

Assume that U.S. and European governments adopt a system of flexible exchange rates. The figure shows the market for euros. If currency traders think the European economy will experience a
Recession and the U.S. economy will not, then this event will most likely cause the

A) euro to appreciate.
B) euro to depreciate.
C) U.S. dollar to depreciate.
D) supply of euros to decrease.