Currency Traders Expect the Dollar to Depreciate

question 89

Multiple Choice

Currency traders expect the dollar to depreciate.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 depreciate,and the change in the equilibrium quantity of dollars exchanged cannot be determined.

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Definitions:

Long-Term Debt

A financial obligation that is due for repayment in more than one year's time.

Ten-Year Treasury Note

A government debt security issued by the U.S. Treasury with a ten-year maturity, which pays interest to the holder every six months.

Cash Equivalent

Short-term, highly liquid investments that are easily convertible to known amounts of cash and close to their maturity.

Certificate of Deposit

A time deposit at a bank or financial institution that offers a fixed interest rate over a specified period.