Which of the following is likely to increase the supply of U.S.dollars in the forex market?
A)If U.S.interest rates are low relative to foreign interest rates
B)If investors' confidence in foreign economies increases
C)If U.S.consumers prefer foreign goods to U.S.goods
D)All of these will increase the supply of U.S.dollars.

Question

Quizplus · Accepted Answer

Low interest rates in the US may lead to foreign investors selling their US assets and converting the proceeds into their own currencies, thereby increasing the supply of US dollars in the forex market. Option B may lead to foreign investors buying more of the currency of that particular foreign economy, thereby reducing the supply of US dollars in the forex market. Option C may increase the demand for foreign currencies as US consumers buy more foreign goods, thereby reducing the supply of US dollars in the forex market.

Which of the Following Is Likely to Increase the Supply