How would a substantial appreciation in the European euro in the foreign exchange market affect the quantity of imports of European products by the U.S.? How would such an appreciation of the European euro affect travel by Americans to Europe?
What will be an ideal response?
If the euro increased in value (appreciated), it means that Americans obtain fewer euros for each U.S. dollar exchanged in foreign exchange market. Therefore, Americans will need more dollars to pay for European products, so the quantity demanded would fall and fewer European products would be imported into the U.S. Also, the appreciation of the euro would make it more costly for Americans to travel in Europe because the dollar would now buy fewer euros.
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