Suppose the exchange rate for the U.S. dollar falls. This could be caused by

Question

Quizplus · Accepted Answer

If the expected future exchange rate falls, then investors will sell dollars in anticipation of the decrease in value, leading to a fall in the exchange rate. The other choices may have the opposite effect (i.e. an increase in U.S. interest rate differential may increase demand for dollars, an increase in world demand for U.S. exports may increase demand for dollars, and a decrease in U.S. import demand may increase the value of the dollar).

Suppose the Exchange Rate for the U