Ceteris paribus, the relationship between quantity demanded of dollars/month and the exchange rate is
A)direct.
B)inverse.
C)positive.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

The relationship between quantity demanded of dollars/month and the exchange rate is usually inverse. This means that as the exchange rate increases, the quantity demanded of dollars decreases, and as the exchange rate decreases, the quantity demanded of dollars increases. This is due to the fact that when the exchange rate is high, foreign goods and investments become relatively cheaper, making people more likely to buy them instead of domestic goods and investments. Conversely, when the exchange rate is low, domestic goods and investments become relatively cheaper, making them more attractive to consumers.

Ceteris Paribus, the Relationship Between Quantity Demanded of Dollars/month and the Exchange