In the foreign exchange market,if the supply of dollars ________ and simultaneously the demand for dollars ________,then the exchange rate definitely ________.

Question

Quizplus · Accepted Answer

When the supply of dollars increases, there are more dollars in the market, which leads to a decrease in the value of each dollar. Simultaneously, if the demand for dollars decreases, there are fewer people in the market willing to buy dollars, which also leads to a decrease in the value of the dollar. This decrease in the exchange rate is known as depreciation. Therefore, the correct answer is C-when the supply of dollars increases and demand for dollars decreases, the exchange rate definitely depreciates.

In the Foreign Exchange Market,if the Supply of Dollars ________