A change in which of the following changes the supply of dollars and shifts the supply curve of doll
I. An increase in the exchange rate.
II. A change in interest rates.
III. A decrease in the expected future exchange rate.

Question

Quizplus · Accepted Answer

An increase in exchange rate (I) does not affect the supply of dollars, as it only affects the demand for dollars. A change in interest rates (II) affects the supply of dollars through its impact on investments and capital flows. A decrease in the expected future exchange rate (III) also affects the supply of dollars by encouraging Americans to sell dollars now before they decrease in value. Therefore, only II and III change the supply of dollars and shift the supply curve of dollars to the left.

A Change in Which of the Following Changes the Supply