In the Foreign Exchange Market, the Supply Curve for Dollars

question 251

Multiple Choice

In the foreign exchange market, the supply curve for dollars slopes upwards because

• A) as the exchange rate rises, more dollars are supplied since the profit from selling dollars falls.
• B) supply curves always slope upwards.
• C) as the exchange rate rises, imports become cheaper, and more dollars are supplied to pay for the increase in the quantity of imports.
• D) as the exchange rate rises, imports become more expensive, and more dollars are supplied to pay for the imports.

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Definitions:

Credible Threat

In a sequential game with two players, a statement made by Player 1 that truthfully (credibly) threatens a penalizing action against Player 2 if Player 2 does something that Player 1 does not want Player 2 to do. Opposite of empty threat.

Coercion

Coercion refers to the practice of persuading someone to do something by using force or threats.

Empty Threat

A declared intention to perform an action that is not actually intended to be carried out, often used as a strategic bluff.

Repeated Game

A strategic situation where the same game is played multiple times, allowing for strategy development based on prior outcomes.