-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 falls.
B) the U.S. interest rate differential increases.
C) the expected future exchange rate rises.
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 falls. 
B) the U.S. interest rate differential increases. 
C) the expected future exchange rate rises. 
D) the current exchange rate falls.

Quizplus · Accepted Answer

A shift in the supply curve for U.S. dollars to the right (from S? to S?) could occur when the expected future exchange rate falls, as this would make holding U.S. dollars less attractive, increasing the supply of dollars in the foreign exchange market.

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