The Following Figure Depicts the Demand for U

question 74

Multiple Choice

The following figure depicts the demand for U.S. dollars in the foreign currency exchange market. Use this figure to answer the following questions.
-If interest rates in Mexico rise relative to interest rates in the United States,the demand curve in the figure above

• A) will not shift because interest rates are not related to exchange rates.
• B) will not shift because interest rates only affect the supply curve.
• C) can either increase from D₁ to D₂ or decrease from D₁ to D₃,depending on the relative magnitude of the two effects.
• D) will increase from D₁ to D_2.
• E) will decrease from D₁ to D_3.

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