Which of the following statements is false?
A)Under flexible exchange rates, the value of the dollar is determined by supply and demand.
B)The demand for dollars is determined by foreign demand for U.S. goods, services, and securities.
C)Ceteris paribus, the quantity demanded of dollars is directly (positively) related to the exchange rate.
D)Ceteris paribus, the quantity supplied of dollars is directly (positively) related to the exchange rate.

Question

Quizplus · Accepted Answer

The statement that the quantity demanded of dollars is directly (positively) related to the exchange rate is false. In fact, the relationship is inverse: as the exchange rate increases (i.e. the value of the dollar increases), the quantity demanded of dollars decreases.

Which of the Following Statements Is False