If nothing else changes, the_________ the current exchange rate, the_________ is the expected profit from holding dollars, all other things remaining the same.
A) lower; larger
B) lower; smaller
C) higher; larger
D) The premise of the question is wrong because the exchange rate has nothing to do with expected profit from holding dollars.

Question

Quizplus · Accepted Answer

According to the given statement, if the exchange rate lowers, the expected profit from holding dollars is larger. This can be explained by the fact that a lower exchange rate means that more dollars can be obtained for a given amount of foreign currency. Therefore, holding on to dollars becomes more profitable as they can be exchanged for a larger amount of foreign currency in the future.

If Nothing Else Changes, The_________ the Current Exchange Rate, The_________

If Nothing Else Changes, The_ the Current Exchange Rate, The_