The lower the exchange rate today, ceteris paribus, the
A) smaller the quantity of U.S. dollars demanded in the foreign exchange market today.
B) greater is the expected profit from buying foreign currency today and holding it.
C) smaller is the expected profit from buying U.S. dollars today and holding them.
D) greater is the expected profit from buying U.S. dollars today and holding them.

Question

Quizplus · Accepted Answer

A lower exchange rate means that U.S. dollars are cheaper to buy today, increasing the potential profit from buying them now and selling them later when the rate increases.

The Lower the Exchange Rate Today, Ceteris Paribus, the