In the foreign exchange market, an increase in the supply of dollars could be the result of

Question

Quizplus · Accepted Answer

An increase in the supply of dollars would mean that there are more dollars available than there are buyers willing to purchase them. This could happen if there is a decrease in the U.S. interest rate differential, meaning that the returns on U.S. investments are relatively lower compared to other countries. As a result, investors may choose to invest in other countries' currencies, leading to an increase in the supply of dollars in the foreign exchange market. Therefore, choice C is the best option.

In the Foreign Exchange Market, an Increase in the Supply