A rightward shift of the BP schedule is the result of a(n)
A)increase in the foreign interest rate.
B)decrease in the foreign interest rate.
C)exogenous fall in export demand.
D)increase in import demand.

Question

Quizplus · Accepted Answer

A rightward shift of the BP schedule indicates an increase in demand for domestic currency in the foreign exchange market, which can occur as a result of a decrease in the foreign interest rate. This makes domestic assets more attractive to foreigners, increasing the demand for domestic currency to purchase them. The other options presented would result in a leftward shift of the BP schedule.

A Rightward Shift of the BP Schedule Is the Result