If there is currently a surplus of dollars, which of the following would you expect to see in the foreign exchange market?
A)The dollar will appreciate.
B)The dollar will depreciate.
C)There will be a decrease in the demand for dollars.
D)There will be a decrease in the supply of dollars.
E)The will be an increase in the quantity of dollars supplied.

Question

Quizplus · Accepted Answer

If there is a surplus of dollars, this means there is an excess supply of dollars in the foreign exchange market. According to the law of supply and demand, when there is an excess supply, the price of the good (in this case the dollar) will decrease, which translates to a depreciation of the dollar. Therefore, we would expect to see the dollar depreciate in the foreign exchange market.

If There Is Currently a Surplus of Dollars, Which of the Following