Suppose the British demand for real estate in the United States increases due to

Question

Suppose the British demand for real estate in the United States increases due to a booming real estate market. What would we expect to happen in the foreign exchange market, holding all other factors constant?

a. The dollar could appreciate or depreciate, but fewer dollars will be traded.

b. The dollar will appreciate and more dollars will be traded.

c. The dollar will depreciate and more dollars will be traded.

d. The dollar will depreciate and fewer dollars will be traded.

e. The dollar will appreciate and fewer dollars will be traded.

Explanation / Answer

Correct option is (b).

Hgher British demand for real estate in US will increase the demand for US dollr in foreign exchange market, which will appreciate the dollar (and depreciate British pounds), and mre number of dollars will be traded.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.