When expected dollar-euro exchange rates rise, the foreign expected dollar return curve shifts:
A) in.
B) out.
C) not at all.
D) Not enough information is provided to answer the question.

Question

Quizplus · Accepted Answer

When expected dollar-euro exchange rates rise, it means that investors expect to get more dollars for each euro in the future. This increases the expected return on investments denominated in euros for dollar-based investors, leading to an outward shift in the foreign expected dollar return curve. This is because the potential for higher returns makes these investments more attractive, increasing demand for them.

When Expected Dollar-Euro Exchange Rates Rise, the Foreign Expected Dollar