-In the figure above, the shift in the supply curve for U.S. dollars from S? to S? could occur when
A) the U.S. interest rate falls.
B) the expected future exchange rate rises.
C) the U.S. interest rate differential increases.
D) the current exchange rate falls.

Question

-In the figure above, the shift in the supply curve for U.S. dollars from S? to S? could occur when
A) the U.S. interest rate falls. 
B) the expected future exchange rate rises. 
C) the U.S. interest rate differential increases. 
D) the current exchange rate falls.

Quizplus · Accepted Answer

A fall in the U.S. interest rate would make U.S. assets less attractive, leading to an increase in the supply of U.S. dollars as investors seek higher returns elsewhere.

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