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:

Tax Rate

The share of one's or a company's revenue earmarked for taxation.

Erosion Costs

Erosion Costs are the costs incurred due to the negative impact of introducing a new product or project on the sales and revenue of existing products or projects.

Incremental Income

The additional income generated from a particular business decision or action.

Fixed Assets

Assets of a long-term nature such as land, buildings, and machinery, which are used in the operations of a business and not expected to be consumed or converted into cash in the short term.