The lower the exchange rate today, ceteris paribus, the
A) greater is the expected profit from buying U.S. dollars today and holding them.
B) smaller is the expected profit from buying U.S. dollars today and holding them.
C) greater is the expected profit from buying foreign currency today and holding it.
D) smaller the quantity of U.S. dollars demanded in the foreign exchange market today.

Question

Quizplus · Accepted Answer

A lower exchange rate today means that U.S. dollars are cheaper to buy, increasing the potential profit from buying them now and selling them later when the rate rises.

The Lower the Exchange Rate Today, Ceteris Paribus, the