Today, the dollar is worth 1.15 euros. Due to changes in economic conditions, in one month people come to expect the dollar will be worth 1.20 euros. This belief
A) increases the demand for euros.
B) decreases the demand for dollars.
C) increases the demand for dollars.
D) increases the value of exports to Europe.

Question

Quizplus · Accepted Answer

If people expect the dollar to be worth more euros in the future, they will want to hold more dollars now to benefit from the expected appreciation, thus increasing the demand for dollars.

Today, the Dollar Is Worth 1