1. Suppose the exit of Great Britain from the European Union (“Brexit”) causes a reduction in confidence in the euro.   
   1. What would be the effect(s) on the market for US dollars (relative to euros)?

Increase in demand for US dollars     

Decrease in demand for US dollars

Increase in supply of US dollars

Decrease in supply of US dollars

 

Why?

 

 

2. Graphically illustrate the effect on the equilibrium exchange rate (euros per dollars).

Answer rating: 100% (QA)

The reduction in confidence in the euro due to Brexit would likely lead to a decrease in demand for euros Consequently there would be an increase in d... View the full answer