Question

the euro is the currency of the european union (e.u.). if the (e.u.) imposes a quota limiting imports from the united states, what will happen to the market for euros and the exchange rate for the euro? choose 1 answer: a supply of the euro increases; the euro depreciates b supply of the euro increases; the euro appreciates c demand for euro decreases; euro depreciates d demand for euro increases; euro appreciates e supply of the euro decreases; the euro appreciates

Explanation:

When the EU imposes a quota on US imports, fewer US - made goods are bought by EU consumers. This means that EU consumers need to exchange fewer euros to buy US goods, so the demand for euros in the foreign - exchange market decreases. According to the basic principle of supply and demand in the foreign - exchange market, when the demand for a currency decreases while the supply remains relatively stable, the value of the currency depreciates.

Answer:

C. Demand for euro decreases; euro depreciates