-In the figure above, the shift in the supply curve for U.S. dollars from S₀to S₂could occur when A) the expected future exchange rate rises. B) the U.S. interest rate rises. C) foreign interest rates rise. D) the current exchange rate falls.

Question

Quizplus · Accepted Answer

When foreign interest rates rise, it becomes more attractive for investors to hold foreign currencies, increasing the supply of U.S. dollars as investors exchange them for foreign currencies.

-In the Figure Above, the Shift in the Supply Curve