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21 August, 04:11

Suppose that currency traders expect that the value of U. S. dollarU. S. dollar will fall in the future. How will this will affect the demand and supply of U. S. dollarU. S. dollar in the foreign exchange market?

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  1. 21 August, 08:09
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    Answer:There will be increase in supply and decrease in demand

    Explanation:

    One of the Law of demand states that the lower the price the higher the quantity demanded and vice versa, while for supply it states that the higher the price the higher the quantity supplied and vice versa.

    Since the value of US dollar is still high then the supply will be high in the market, but with the expectation of future fall, demand will be low because buyers are waiting for drop in value. There will be excess supply and lower demand.
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