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

Quizplus · Accepted Answer

A shift in the supply curve for U.S. dollars from S1 to S2 could occur when the expected future exchange rate rises, as investors might hold onto their dollars now, expecting to get more foreign currency per dollar in the future.

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