Other things the same, if the expected return on U.S. assets increased (e.g. higher interest rate), the
a.
supply of dollars in the market for foreign-currency exchange shifts right.
b.
supply of dollars in the market for foreign-currency exchange shifts left.
c.
demand for dollars in the market for foreign-currency exchange does not shifts
d.
demand for dollars in the market for foreign-currency exchange shifts left.
How do you know?
Answer
Option b
supply of dollars in the market for foreign-currency exchange shifts left
the expected return in the US increases which decreases the dollar supply as the US investors start switching international investments to domestic and that decreases the supply which shifts the supply curve to the left.
Other things the same, if the expected return on U.S. assets increased (e.g. higher interest rate),...