Economics 0455 · IGCSE · Foreign exchange rates

Foreign exchange rates — practice question

In the diagram, curves $D_1$ and $S_1$ show the demand for and supply of the US dollar ($\$$) in relation to the Chinese yuan. What is the most likely reason for the demand curve for US dollars to move from $D_1$ to $D_2$?

  • Aa fall in Chinese interest rates
  • Ba fall in US interest rates
  • Ca faster growth rate in the US economy
  • Da reduction in the US government budget deficit

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