The figure above shows supply curves of dollars in the foreign exchange market.
-Based on the figure above, which of the following factors could lead the supply curve to shift leftward from S₀ to S₁?

Question

Quizplus · Accepted Answer

A fall in foreign interest rates would decrease the supply of dollars in the foreign exchange market, causing the supply curve to shift leftward from S₀ to S₁. The reason for this is that lower foreign interest rates would decrease the return on foreign investments, making them less attractive to investors, which in turn reduces the demand for foreign currency and increases the demand for dollars.

The Figure Above Shows Supply Curves of Dollars in the Foreign