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Exchange Rates: Shifts in Supply and Demand quiz

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Termini in questo insieme (15)

  • What happens to the demand for US dollars if foreign income increases?
    The demand for US dollars increases, shifting the demand curve to the right and causing the US dollar to appreciate.
  • How do higher US interest rates affect the demand for US dollars?
    Higher US interest rates increase the demand for US dollars as investors seek higher returns, shifting the demand curve to the right and appreciating the dollar.
  • What is the effect on the exchange rate when foreign income decreases?
    A decrease in foreign income reduces demand for US dollars, shifting the demand curve to the left and causing the US dollar to depreciate.
  • How does an expected appreciation of the US dollar affect current demand?
    If the US dollar is expected to appreciate, demand for US dollars increases now as people want to hold dollars before they become more valuable.
  • What happens to the exchange rate when demand for US dollars shifts to the right?
    The exchange rate increases, meaning the US dollar appreciates relative to other currencies.
  • If US interest rates decrease, what happens to the demand for US dollars?
    Demand for US dollars decreases, shifting the demand curve to the left and causing the dollar to depreciate.
  • How does an increase in US income affect the supply of US dollars?
    An increase in US income leads to more imports, increasing the supply of US dollars in the foreign exchange market.
  • What is the effect of higher foreign interest rates on the supply of US dollars?
    Higher foreign interest rates increase the supply of US dollars as Americans invest abroad, shifting the supply curve to the right.
  • How does an expected depreciation of the US dollar affect its supply?
    If the US dollar is expected to depreciate, people supply more dollars now to buy foreign assets before the dollar loses value.
  • What happens to the exchange rate when the supply of US dollars increases?
    The exchange rate decreases, meaning the US dollar depreciates relative to other currencies.
  • If US income decreases, what happens to the supply of US dollars?
    The supply of US dollars decreases, shifting the supply curve to the left and causing the dollar to appreciate.
  • What is the effect on the exchange rate when the supply of US dollars shifts to the left?
    The exchange rate increases, so the US dollar appreciates relative to other currencies.
  • How do lower foreign interest rates affect the supply of US dollars?
    Lower foreign interest rates decrease the supply of US dollars as there is less incentive to invest abroad.
  • When analyzing shifts in the exchange rate market, what is the primary focus?
    The primary focus is on how the shifts affect the exchange rate, not the quantity of currency exchanged.
  • What are the three main determinants that can shift demand or supply in the exchange rate market?
    The three main determinants are changes in income, interest rates, and speculative expectations.