when the united states dollar appreciates against the euro, which of the following will most likely happen?
a. European firms will pay fewer euros for equipment purchased from the U.S.
b. European products will become more expensive for U.S. consumers
c. U.S. tourists will pay fewer dollars for trips to Europe
d. the European trade deficit will increase
e. the U.S. trade deficit will decrease

Question

20-12-2022
Business

Answered

when the united states dollar appreciates against the euro, which of the following will most likely happen?
a. European firms will pay fewer euros for equipment purchased from the U.S.
b. European products will become more expensive for U.S. consumers
c. U.S. tourists will pay fewer dollars for trips to Europe
d. the European trade deficit will increase
e. the U.S. trade deficit will decrease

Answer :

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arenasaleem890 arenasaleem890 · Answer 1 · 2022-12-25T01:57:49-05:00

The correct answer is a. European firms will pay fewer euros for equipment purchased from the U.S.

Less money will be spent by European businesses on American-made equipment. The cost of European goods will increase for US customers. When the value of the dollar rises (the exchange rate rises), domestic products and services become more expensive relative to their international counterparts. The cost of exporting goods will increase if the value of the dollar increases because international buyers would have to pay more in USD for American goods. That indicates that fewer American goods will likely be exported as a result of the increased price. Inflation is often lowered by currency appreciation because imports become more affordable and the reduced prices result in lower inflation. It reduces consumer interest in domestic goods and increases the appeal of imports.

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