-In the figure above, the shift in the demand curve for U.S. dollars from D? to D? could occur when
A) the expected future exchange rate falls.
B) the U.S. interest rate drops.
C) people expect that the dollar will depreciate.
D) foreign interest rates drop.

Question

-In the figure above, the shift in the demand curve for U.S. dollars from D? to D? could occur when
A) the expected future exchange rate falls. 
B) the U.S. interest rate drops. 
C) people expect that the dollar will depreciate. 
D) foreign interest rates drop.

Quizplus · Accepted Answer

A shift in the demand curve for U.S. dollars from D1 to D2 could occur when foreign interest rates drop. This is because lower foreign interest rates make investments in those countries less attractive compared to investments in the U.S., increasing the demand for U.S. dollars as investors seek higher returns in the U.S. market.

-In the Figure Above, the Shift in the Demand Curve