Name three factors in the foreign exchange market that affect either the quantity of dollars demanded or the demand for dollars. Discuss whether the factor increases or decreases the number of dollars people want to hold
What will be an ideal response?
Three factors are the exchange rate, the U.S. interest rate differential, and the expected future exchange rate. If the exchange rate rises, the quantity of dollars demanded decreases. If the U.S. interest rate differential is larger (either because the U.S. interest rate rose or because foreign interest rates fell) then the demand for dollars increases. And, if the expected future value of the exchange rate is higher, then the current demand for dollars increases.
You might also like to view...
John is a user of WhatsApp Messenger. When he initially started using it, the messenger was not very popular among his friends and John did not spend much time on it
As more and more of John's friends started using the messenger, the messenger's value to John increased substantially. What kind of externality is reflected in this example?
What are the three types of unemployment and how do they change over the business cycle?
What will be an ideal response?
Ida May Fuller was the first person to:
A. receive Social Security payments for over 20 years. B. petition Congress for indexing Social Security payments. C. receive a Social Security check. D. have her Social Security check adjusted for inflation.
Social Security payments were not indexed to adjust for inflation until:
A. 1940. B. 1968. C. 1975. D. 1990.