Which of the following correctly explains how the dollars-per-euro exchange rate will change in the near future if the exchange rate is expected to rise? (1 point)

Question

• The expectation of an appreciating euro increases the demand for euros and decreases the supply of euros on the foreign exchange market. The result is a lower exchange rate in the near future.
• The expectation of an appreciating euro increases the supply of euros and decreases the demand for euros on the foreign exchange market. The result is a higher exchange rate in the near future.
• The expectation of an appreciating euro increases the supply of euros and decreases the demand for euros on the foreign exchange market. The result is a lower exchange rate in the near future.
• The expectation of an appreciating euro increases the demand for euros and decreases the supply of euros on the foreign exchange market. The result is a higher exchange rate in the near future.

Answer 1

The expectation of an appreciating euro increases the demand for euros and decreases the supply of euros on the foreign exchange market. The result is a higher exchange rate in the near future.