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

Question

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

Quizplus · Accepted Answer

An increase in the expected future exchange rate makes holding U.S. dollars more attractive, increasing demand for dollars and shifting the demand curve to the right.

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