A change in which of the following changes the supply of dollars and shifts the supply curve of dollars?
I. an increase in the exchange rate
II. a change in interest rates
III. a decrease in the expected future exchange rate
A) I
B) I and II
C) II and III
D) I, II, and III

Question

Quizplus · Accepted Answer

Changes in interest rates and expectations about future exchange rates can affect the supply of a currency. An increase in interest rates can make a currency more attractive to hold, potentially increasing its supply. Similarly, expectations of a future depreciation (a decrease in the future exchange rate) can lead to an increase in the supply of the currency now, as holders may prefer to sell it before its value decreases. An increase in the current exchange rate itself does not shift the supply curve but rather moves along it.

A Change in Which of the Following Changes the Supply