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Which of the Following Statements About the Foreign Exchange Market

Question 62

Multiple Choice

Which of the following statements about the foreign exchange market is correct?

A) The higher the expected future exchange rate, the smaller is the expected profit from holding dollars and so the smaller is the demand for dollars.
B) The higher the expected future exchange rate, the smaller is the expected profit from holding dollars and so the greater is the demand for dollars.
C) The higher the expected future exchange rate, the greater is the expected profit from holding dollars and so the greater is the demand for dollars.
D) The lower the expected future exchange rate, the greater is the expected profit from holding dollars and so the greater is the demand for dollars.
E) The lower the expected future exchange rate, the smaller is the expected profit from holding dollars and so the greater is the demand for dollars.

Correct Answer: