The figure above shows the market for foreign exchange in 2001 and 2009.
-Which of the following could have lead to the shifts illustrated in the figure above?
I.The U.S.exchange rate was expected to depreciate between 2001 and 2009.
Ii. The U.S.exchange rate was expected to appreciate between 2001 and 2009.
Iii. The U.S.interest rate fell relative to interest rates in other countries between 2001 and 2009.

Question

Quizplus · Accepted Answer

A depreciation of the U.S. exchange rate and a fall in U.S. interest rates relative to other countries would both likely lead to shifts in demand and supply in foreign exchange markets, consistent with the shifts described.

The Figure Above Shows the Market for Foreign Exchange in 2001