A change in which of the following changes the supply of dollars and shifts the supply curve of dollars?
I. An increase in the exchange rate.
II. A change in interest rates.
III. A decrease in the expected future exchange rate.
A) I
B) I and II
C) II and III
D) I, II, and III

Question

Quizplus · Accepted Answer

I. An increase in the exchange rate does not change the supply of dollars, as it affects demand for dollars instead (as it means that fewer dollars are needed to purchase foreign currency).
II. A change in interest rates affects the demand for dollars, not the supply, as it affects the attractiveness of holding dollars relative to other currencies. 
III. A decrease in the expected future exchange rate would increase the supply of dollars, as it would make it less attractive to hold dollars in anticipation of a lower exchange rate in the future. Therefore, this would shift the supply curve of dollars.

A Change in Which of the Following Changes the Supply