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

Question

Quizplus · Accepted Answer

An increase in foreign interest rates makes foreign assets more attractive, leading to an increased supply of U.S. dollars as investors exchange dollars for foreign currency to invest abroad.

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