Which of the following occurrences would NOT shift the demand curve for U.S. dollars in the foreign exchange market?
A) an increase in the U.S. exchange rate
B) an increase in the expected future U.S. exchange rate
C) an increase in U.S. interest rates
D) an increase in foreign interest rates

Question

Quizplus · Accepted Answer

An increase in the U.S. exchange rate itself does not shift the demand curve for U.S. dollars; it is a movement along the demand curve. Shifts in the demand curve are caused by factors like expectations of future exchange rates, interest rate differentials, and changes in economic growth, not by changes in the current exchange rate.

Which of the Following Occurrences Would NOT Shift the Demand