Author Question: Name three factors in the foreign exchange market that affect either the quantity of dollars ... (Read 21 times)

cartlidgeashley · **on:** Jun 29, 2018

Name three factors in the foreign exchange market that affect either the quantity of dollars demanded or the demand for dollars. Discuss whether the factor increases or decreases the number of dollars people want to hold.

What will be an ideal response?

Question 2

The demand for loanable funds curve shows the

A) positive relationship between the interest rate and the quantity of loanable funds demanded.
B) positive relationship between the demand for loanable funds curve and the supply of loanable funds curve.
C) U-shaped relationship between the interest rate and the quantity of loanable funds demanded.
D) negative relationship between the interest rate and the quantity of loanable funds demanded.
E) negative relationship between the demand for loanable funds curve and the supply of loanable funds curve.

Koolkid240 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Three factors are the exchange rate, the U.S. interest rate differential, and the expected future exchange rate. If the exchange rate rises, the quantity of dollars demanded decreases. If the U.S. interest rate differential is larger (either because the U.S. interest rate rose or because foreign interest rates fell) then the demand for dollars increases. And, if the expected future value of the exchange rate is higher, then the current demand for dollars increases.

Answer to Question 2

D