If people expect the future exchange rate for dollars will be lower, then in the foreign exchange market the current

Question

Quizplus · Accepted Answer

EIf people expect the future exchange rate for dollars to be lower, it means they anticipate that the dollar will weaken compared to other currencies. This expectation would decrease the demand for dollars now (C) as investors and others would be less inclined to hold an asset that is expected to lose value. Similarly, the quantity demanded of dollars decreases (E) because at any given price, buyers would want fewer dollars due to the anticipated depreciation.

If People Expect the Future Exchange Rate for Dollars Will