An increase in the dollar price of foreign goods relative to the dollar price of U.S. goods will have which of the following effects?
A)shift the supply curve of dollars in the foreign exchange market to the left
B)decrease the quantity supplied of dollars
C)shift the supply curve of dollars in the foreign market to the right
D)increase the quantity supplied of dollars

Question

Quizplus · Accepted Answer

An increase in the dollar price of foreign goods relative to the dollar price of U.S. goods will make U.S. goods relatively cheaper, and foreign goods relatively more expensive. This will lead to an increase in the demand for U.S. goods, and a decrease in the demand for foreign goods. As a result, the quantity supplied of dollars will increase, and the supply curve of dollars in the foreign exchange market will shift to the right.

An Increase in the Dollar Price of Foreign Goods Relative