If the supply of dollars in the market for foreign-currency exchange shifts left, then the exchange rate
A)rises and the quantity of dollars exchanged for foreign currency falls.
B)rises and the quantity of dollars exchanged for foreign currency does not change.
C)rises and the quantity of dollars exchanged for foreign currency rises.
D)falls and the quantity of dollars exchanged for foreign currency does not change.

Question

Quizplus · Accepted Answer

When the supply of dollars in the market for foreign-currency exchange decreases (shifts left), it means there are fewer dollars available for the same demand. This scarcity increases the price of dollars in terms of foreign currency (the exchange rate rises), and because the price is higher, the quantity of dollars exchanged for foreign currency falls.

If the Supply of Dollars in the Market for Foreign-Currency