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

Question

Quizplus · Accepted Answer

A shift in the supply curve for U.S. dollars from S₀ to S₂ indicates an increase in the supply of dollars. This can occur when the expected future exchange rate falls, as people anticipate that the dollar will be worth less in the future, prompting them to supply more dollars now.

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