The ________ the expected profit from holding a foreign currency, the greater is the ________ in the foreign exchange market.
A) larger; quantity demanded of dollars
B) smaller; quantity demanded of foreign currency
C) larger; quantity supplied of dollars
D) None of the above is correct because the expected profit has nothing to do with the supply and demand for dollars or foreign currency.

Question

Quizplus · Accepted Answer

The larger the expected profit from holding a foreign currency, the greater is the quantity supplied of dollars, as investors sell dollars to buy the foreign currency, increasing the supply of dollars in the market.

The ________ the Expected Profit from Holding a Foreign Currency