Other things remaining the same, if the expected future exchange rate rises, the demand curve for U.S. dollars shifts ________ and the supply curve of U.S. dollars shifts ________.
A) rightward; rightward
B) rightward; leftward
C) leftward; rightward
D) leftward; leftward

Question

Quizplus · Accepted Answer

If the expected future exchange rate of the U.S. dollar rises, it means that people anticipate the dollar will be stronger in the future. This increases the demand for U.S. dollars now, shifting the demand curve rightward. Conversely, anticipating a stronger dollar in the future makes holding onto dollars more attractive, reducing the current supply of dollars in the foreign exchange market, which shifts the supply curve leftward.

Other Things Remaining the Same, If the Expected Future Exchange