-In the figure above, the shift in the supply curve for U.S. dollars from S₀to S₁could occur when A) the U.S. interest rate differential increases. B) the U.S. interest rate differential decreases. C) the current exchange rate falls. D) the expected future exchange rate falls.

Question

Quizplus · Accepted Answer

The correct answer is A because an increase in the U.S. interest rate differential will make U.S. dollars more attractive to foreign investors, leading to an increase in the demand for U.S. dollars and a shift in the supply curve from S0 to S1.

-In the Figure Above, the Shift in the Supply Curve