Suppose the exchange rate rises from 80 yen per U.S. dollar to 90 yen per U.S. d

Question

Suppose the exchange rate rises from 80 yen per U.S. dollar to 90 yen per U.S. dollar. What is the effect of this change on the quantity of U.S. dollars that people plan to sell in the foreign exchange market? The quantity of us. dollars that people plan to sell in the foreign exchange market . 0 A. decreases and the supply curve of U.S. dollars shifts leftward O B. decreases and a movement down along the supply curve for U.S. dollars occurs C. increases and the supply curve of U.S. dollars shifts rightward O D. increases and a movement up along the supply curve of U.S. dollars occurs

Explanation / Answer

Answer is D. Increases and a movement up along the supply curve of US dollar occurs.

Explanation:

The exchange rate of US dollar depreciates result in imports of the country become cheaper and will increase. Therefore, more dollars are required for the increased imports hence, the supply of dollar increases along the same supply curve.

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