-In the figure above, the shift in the demand curve for U.S. dollars from D₀ to D₁ could occur when A) the expected future exchange rate decreases. B) the U.S. interest rate rises. C) people expect that the dollar will depreciate. D) foreign interest rates increase.

Question

Quizplus · Accepted Answer

A shift in the demand curve for U.S. dollars to the right, as described, could occur when the U.S. interest rate rises. This is because higher interest rates in the U.S. would attract more foreign capital, increasing the demand for U.S. dollars as investors exchange their currency for dollars to invest in the U.S.

-In the Figure Above, the Shift in the Demand Curve