question 5 (1 point) suppose an iphone costs us$350 in the us. the same phone can be purchased in germany…

question 5 (1 point) suppose an iphone costs us$350 in the us. the same phone can be purchased in germany for 300 euro at a time when 1 euro = 1 usd. what affect would the purchases of these phones likely have on the value of the euro in us$ terms? the euro will remain unchanged but germany will sell lots of phones. the euro will remain unchanged but germany will sell very few phones as a result. the euro will get weaker (less expensive). the euro will get stronger (more expensive).

question 5 (1 point) suppose an iphone costs us$350 in the us. the same phone can be purchased in germany for 300 euro at a time when 1 euro = 1 usd. what affect would the purchases of these phones likely have on the value of the euro in us$ terms? the euro will remain unchanged but germany will sell lots of phones. the euro will remain unchanged but germany will sell very few phones as a result. the euro will get weaker (less expensive). the euro will get stronger (more expensive).

Answer

Brief Explanation:

When the iPhone is cheaper in Germany (300 Euro while 350 USD in the US with 1 - 1 exchange rate initially), more people in the US will want to buy iPhones from Germany. To buy these phones, they need to exchange US - dollars for Euros. This increases the demand for Euros in the foreign - exchange market. According to the law of supply and demand, an increase in the demand for a currency makes it more valuable.

Answer:

The Euro will get stronger (more expensive).