Which of the Following Statements About the Foreign Exchange Market

question 128

Multiple Choice

Which of the following statements about the foreign exchange market is correct?

• A) The higher the expected future exchange rate, the smaller is the expected profit from holding dollars and so the greater is the demand for dollars.
• B) The lower the expected future exchange rate, the smaller is the expected profit from holding dollars and so the greater is the demand for dollars.
• C) The higher the expected future exchange rate, the smaller is the expected profit from holding dollars and so the smaller is the demand for dollars.
• D) The higher the expected future exchange rate, the greater is the expected profit from holding dollars and so the greater is the demand for dollars.
• E) The lower the expected future exchange rate, the greater is the expected profit from holding dollars and so the greater is the demand for dollars.

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