The figure above shows supply curves of dollars in the foreign exchange market.
-The supply curve shifts rightward from S₀ to S₂ when the U.S.interest rate ________ and foreign interest rates are unchanged. The supply curve shifts rightward from S₀ to S₂ when the expected future exchange rate ________.

Question

Quizplus · Accepted Answer

A fall in the U.S. interest rate makes domestic assets less attractive, increasing the supply of currency. A fall in the expected future exchange rate decreases the expected return on domestic assets, also increasing the supply of currency.

The Figure Above Shows Supply Curves of Dollars in the Foreign