A ________ in the real interest rate ________ consumption ...

[gonzo233]

A ________ in the real interest rate ________ consumption expenditure and shifts the consumption function ________.
 
  A) fall; increases; downward
  B) rise; decreases; upward
  C) fall; increases; upward
  D) fall, decreases; upward
  E) rise, increases; downward

Question 2

In the foreign exchange market, how does a change in expected future U.S. exchange rate affect the supply of dollars?
 
  What will be an ideal response?

[lin77x]

Answer to Question 1

C

Answer to Question 2

Changes in the expected future exchange rate change the supply of dollars. If the expected future exchange rate falls, the supply of dollars increases and the supply curve shifts rightward because the expected profit from holding dollars decreases. If the expected future exchange rate rises, the supply of dollars decreases and the supply curve shifts leftward because the expected profit from holding dollars increases.