Currency traders expect the dollar to appreciate. What impact will this have on equilibrium in the foreign exchange market?
A) The dollar will appreciate, and the equilibrium quantity of dollars will decrease.
B) The dollar will depreciate, and the equilibrium quantity of dollars exchanged will decrease.
C) The dollar will appreciate, and the equilibrium quantity of dollars will increase.
D) The dollar will appreciate, and the change in the equilibrium quantity of dollars exchanged cannot be determined.
Answer: D
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Assume individuals consider only the long run effects of changes in future macro variables when forming expectations of future output and future interest rates. Suppose individuals expect future government spending to increase. Given this information, individuals will expect
A) an increase in the expected future interest rate and no change in expected future output. B) an increase in the expected future interest rate and an increase in expected future output. C) an increase in the expected future interest rate and a reduction in expected future output. D) an increase in the expected future interest rate and an ambiguous effect on expected future output.
If M = 200, P = 100, and Q = 10, then V is:
a. 20. b. 2. c. 10. d. 5. e. 2,000.