Today, the dollar is worth 1.15 euros. Due to changes in economic conditions, people expect that the dollar will be worth 1.20 euros in the next month. This belief
A) increases the demand for dollars.
B) decreases the demand for dollars.
C) increases the demand for euros.
D) increases the value of exports to Europe.

Question

Quizplus · Accepted Answer

Expectations that the dollar will strengthen (increase in value from 1.15 to 1.20 euros) make holding dollars more attractive, as they will be worth more euros in the future. This anticipation increases the demand for dollars as investors and others seek to benefit from the expected appreciation.

Today, the Dollar Is Worth 1