In the market for foreign-currency exchange, the supply curve represents:
A)national saving
B)private saving
C)domestic investment
D)net foreign investment
E)none of the above

Question

Quizplus · Accepted Answer

The supply curve in the foreign-currency exchange market represents net foreign investment, which is the amount of foreign investment in a country minus the amount of domestic investment abroad. As a country attracts more foreign investment, the supply of its currency increases in the foreign exchange market, causing the exchange rate to decrease. Therefore, the supply curve represents the relationship between the exchange rate and net foreign investment.

In the Market for Foreign-Currency Exchange, the Supply Curve Represents