The expectations of speculators in the United States that the exchange rate for the euro will fall in the future will increase the supply of euros in the foreign exchange market and decrease the exchange rate for the euros.

Question

Quizplus · Accepted Answer

When speculators expect a future fall in the exchange rate for the euro, they will try to sell euros in order to avoid incurring losses. This increase in selling will lead to an increase in the supply of euros in the foreign exchange market. According to the law of supply and demand, an increase in supply leads to a decrease in price, so the exchange rate for the euros will decrease.

The Expectations of Speculators in the United States That the Exchange