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Homework answers / question archive / The following figure depicts the demand for Chinese yuan in the foreign currency exchange market Use this figure to answer the questions that follow: If the interest rates in China rise relative to interest rates in the United States, the demand curve in the figure above will not shift because interests rates are not related to exchange rates will not shift because interests rates only affect the supply curve can either increase from D_1 to D_2 or decrease from D_1 to D_3 will increase from D_1 to D_2 will decrease from D_1 to D_3
The following figure depicts the demand for Chinese yuan in the foreign currency exchange market Use this figure to answer the questions that follow: If the interest rates in China rise relative to interest rates in the United States, the demand curve in the figure above will not shift because interests rates are not related to exchange rates will not shift because interests rates only affect the supply curve can either increase from D_1 to D_2 or decrease from D_1 to D_3 will increase from D_1 to D_2 will decrease from D_1 to D_3
Solution:- d. will increase from D1 to D2. (As interest rate in China is greater so demand for yuan will rise which will shift the demand curve from D1 to D2.)
