In the foreign exchange market, a change in which of the following will result in a movement along the demand curve for Canadian dollars?
A)the U.S.interest rate
B)the Canadian interest rate
C)an increase in Canadian exports
D)the exchange rate
E)the expected future exchange rate

Question

Quizplus · Accepted Answer

A change in the exchange rate will result in a movement along the demand curve for Canadian dollars as individuals and businesses adjust the quantity of Canadian dollars they demand based on the new exchange rate. Choices A and B may affect the demand for Canadian dollars, but they would shift the entire demand curve rather than result in a movement along it. Choice C would shift the demand curve to the right, indicating an increase in demand at every exchange rate. Choice E may affect the expected future exchange rate, but it would not directly result in a movement along the current demand curve.

In the Foreign Exchange Market, a Change in Which of the Following