An increase in the supply of U.S. dollars to the foreign exchange market could be caused by all of the following except

Question

Quizplus · Accepted Answer

An increase in U.S. incomes typically leads to more spending, including on imports, which would increase the supply of dollars as consumers exchange them for foreign currency. Lower U.S. interest rates make holding dollars less attractive compared to other currencies, leading to an increase in the supply of dollars as investors seek higher returns elsewhere. Buying more imported cars and taking more trips abroad both require converting dollars into foreign currencies, increasing the supply of dollars in the foreign exchange market. A fall in U.S. incomes would likely decrease spending on imports and overseas travel, reducing the supply of dollars in the foreign exchange market, making D the correct answer.

An Increase in the Supply of U