If the current exchange rate is 0.60 euros per Australian dollar and the expected exchange rate at the end of the month rises to 0.80 euros per Australian dollar,then the demand for dollars ________ because people expect holdings of Australian dollars to become ________ profitable.

Question

Quizplus · Accepted Answer

When the expected exchange rate rises, it means that there will be more euros obtained per Australian dollar, which makes holding Australian dollars more profitable. As a result, people would demand more Australian dollars, leading to an increase in the demand for dollars.

If the Current Exchange Rate Is 0