Suppose new information leads people to expect future appreciation of the Canadian dollar.Then all of the following occurs except
A)the supply of dollars decreases.
B)the current exchange rate rises.
C)the demand for dollars increases.
D)the equilibrium quantity of Canadian dollars increases.
E)none of the above

Question

Quizplus · Accepted Answer

When people expect the Canadian dollar to appreciate, they will want to hold more of it, increasing demand and decreasing supply, which raises the exchange rate. However, the equilibrium quantity of Canadian dollars does not necessarily increase; it depends on the shifts in supply and demand.

Suppose New Information Leads People to Expect Future Appreciation of the Canadian