In the Foreign Exchange Market, the Supply Curve for Dollars

question 407

Multiple Choice

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

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

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Definitions:

Black, Jensen, and Scholes

Refers to the authors of a landmark study in finance, particularly known for their work related to the capital asset pricing model (CAPM) and option pricing theory.

CAPM

The Capital Asset Pricing Model is a financial model that describes the relationship between systemic risk and expected return for assets, particularly stocks.

Security Market Line

A graphical representation of the Capital Asset Pricing Model, showing the relationship between the expected return of an investment and its risk.

Estimated Slope

In statistics, it's the calculated gradient of a line of best fit through a data set, often used in linear regression.