If people expect the foreign exchange rate for dollars to rise in the future
A) the demand for dollars today decreases.
B) the demand for dollars today increases.
C) the demand for dollars today is unaffected.
D) there is a movement along the demand curve for dollars.

Question

Quizplus · Accepted Answer

If people expect the foreign exchange rate for dollars to rise in the future, it means they anticipate that dollars will be more valuable. Therefore, they are more likely to want to hold dollars now before the value increases, leading to an increase in the demand for dollars today.

If People Expect the Foreign Exchange Rate for Dollars to Rise