-In the figure above, the shift in the supply curve for U.S. dollars from S₀ to S₂ could occur when A) the U.S. interest rate falls. B) the expected future exchange rate rises. C) the U.S. interest rate differential increases. D) the current exchange rate falls.

Question

Quizplus · Accepted Answer

A fall in the U.S. interest rate would make U.S. assets less attractive, increasing the supply of U.S. dollars as investors seek higher returns elsewhere, shifting the supply curve from S₀ to S₂.

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