If people expect the dollar to depreciate, then the
A) demand for dollars will decrease, the supply of dollars will increase, and the exchange rate will fall.
B) demand for dollars will decrease, the supply of dollars will not change, and the exchange rate will fall.
C) supply of dollars will increase, the demand for dollars will not change, and the exchange rate will fall.
D) demand for dollars will increase, the supply of dollars will decrease, and the exchange rate will rise.

Question

Quizplus · Accepted Answer

When people expect the dollar to depreciate, they are likely to sell dollars and buy other currencies, leading to a decrease in demand for dollars and an increase in the supply of dollars on the foreign exchange market. This results in a fall in the exchange rate of the dollar.

If People Expect the Dollar to Depreciate, Then the