Question

The Federal Reserve decreases the money supply in the United States causing interest rates to increase.Draw correctly labeled graphs to show how the increased interest rates in the scenario will affect the demand for the U.S. dollar and supply of the EU euro in the foreign exchange market.Based on the scenario, what will happen to the value of the EU euro

Answer 1

Following are the solution to the given question:

Step-by-step explanation:

Please find the graph file in the attachment.

Unless the amount of money drops, the tax rate will increase. This will impact the euro currency supplies and US dollar market, that's a supply of European union would motivate people who hold to see what's happening in Europe. It will move towards the right when it sells the euro and competition for international goods and services would rise. Throughout this scenario, US dollars will be requested through persons keeping currency apart from US dollars. They will be motivated by others.