In the foreign exchange market, a change in which of the following will result in a movement along the demand curve for Canadian dollars?
A)the U.S. interest rate
B)the Canadian interest rate
C)the exchange rate
D)the expected future exchange rate
E)an increase in Canadian exports

Question

Quizplus · Accepted Answer

A change in exchange rate will result in a movement along the demand curve for Canadian dollars. An increase in exchange rate will make Canadian dollars more expensive, leading to a decrease in the quantity demanded, hence a movement upwards and to the left along the demand curve. Conversely, a decrease in exchange rate will make Canadian dollars cheaper, leading to an increase in the quantity demanded, hence a movement downwards and to the right along the demand curve. Changes in interest rates, expected future exchange rates, and Canadian exports will shift the demand curve itself.

In the Foreign Exchange Market, a Change in Which of the Following