When would the exchange rate fall the most?
A)The supply of and demand for dollars both increase.
B)The supply of dollars increases, and the demand for dollars decreases.
C)The supply of dollars decreases, and the demand for dollars increases.
D)The supply of and demand for dollars both decrease.
E)The Bank of Canada intervenes.

Question

Quizplus · Accepted Answer

If there is an increase in the supply of dollars and a decrease in the demand for dollars, there will be an excess supply of dollars in the market, which would lead to a decrease in the exchange rate. This is because there are more dollars available than there are people willing to buy them, so the price of dollars (exchange rate) would fall.

When Would the Exchange Rate Fall the Most