The demand curve for a foreign currency
A) slopes upward
B) slopes downward
C) is horizontal
D) has a slope of 45 degrees
E) is vertical

Question

Quizplus · Accepted Answer

The demand curve for a foreign currency slopes downward. This is because as the price of the foreign currency increases, the quantity demanded by domestic consumers decreases, since they will need to pay more in their domestic currency to purchase the foreign currency. Conversely, as the price of the foreign currency decreases, the quantity demanded by domestic consumers increases, since they will need to pay less in their domestic currency to purchase the foreign currency.

The Demand Curve for a Foreign Currency