Concerned about the euro appreciation against the dollar

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At the beginning of 2004, firms in the Eurozone were concerned about the euro appreciation against the dollar. According to a report by the Washington Post, "Two years ago an American museum ordered a case for $10,000 [from Germany], for delivery now [January 2004]. Under current exchange rates the case would be priced closer to $13,000 -- but the customer still expects to pay the old price." (John Burgess, "Rising Euro Tests European Unity - Some Countries Complain of Falling Exports; Others Cite the Benefits of a Strong Currency," Washington Post, Saturday, January 24, 2004, Page A13.)

Which of the following is NOT true about the euro appreciation against the dollar?

a. All else being equal, euro appreciation makes the U.S. more attractive for Eurozone tourists.

b. All else being equal, euro appreciation reduces earnings of companies in the Eurozone from their U.S. operations.

c. All else being equal, euro appreciation raises the real exchange rate of the euro against the dollar.

d. All else being equal, euro appreciation lowers the price U.S. imports from the Eurozone and hurts the U.S. trade balance.

Reference no: EM132272849

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