Other things remaining the same, if the expected future exchange rate rises, the demand curve for
u.S. dollars shifts__________ and the supply curve of U.S. dollars shifts__________ .
A) rightward; rightward
B) leftward; rightward
C) leftward; leftward
D) rightward; leftward

Question

Quizplus · Accepted Answer

If the expected future exchange rate rises, it means that more foreign currency will be needed to acquire a U.S. dollar in the future. This increases the demand for U.S. dollars and shifts the demand curve rightward. At the same time, the supply of U.S. dollars will decrease as people hold onto them in anticipation of a higher exchange rate in the future, shifting the supply curve leftward. Therefore, the correct answer is D.

Other Things Remaining the Same, If the Expected Future Exchange