In the foreign exchange market, how does a change in expected future U.S. exchange rate affect the demand for dollars?
What will be an ideal response?
Changes in the expected future exchange rate change the demand for dollars. If the expected future exchange rate falls, the demand for dollars decreases and the demand curve shifts leftward because the expected profit from holding dollars decreases. If the expected future exchange rate rises, the demand for dollars increases and the demand curve shifts rightward because the expected profit from holding dollars increases.
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Which of the following statements is true of economic reasoning?
A) Economic reasoning hampers optimal decision making. B) Economic reasoning can only be used with normative choices. C) Economic reasoning implies that leisure time is free and costless. D) Economic reasoning helps people make the best use of scarce resources.
When profits are the result of pure luck, they can be distinguished from profits attributable to correct predictions by
A) asking the people who profited. B) finding out whether the profits were earned through effort. C) no known empirical criteria. D) whether or not they were generally anticipated.