-In the above figure, suppose the economy is initially at point A. People come to expect the future U.S. exchange rate to be higher. As a result there is a change from point A to a point such as__________
A) point D
B) point B
C) point C
D) point E

Question

-In the above figure, suppose the economy is initially at point A. People come to expect the future U.S. exchange rate to be higher. As a result there is a change from point A to a point such as__________ 
A) point D 
B) point B 
C) point C 
D) point E

Quizplus · Accepted Answer

When people expect the future U.S. exchange rate to be higher, they anticipate that the U.S. dollar will appreciate. This expectation increases demand for the dollar now, shifting the demand curve to the right, leading to a higher exchange rate and a movement from point A to point D.

-In the Above Figure, Suppose the Economy Is Initially at Point