4. Supply in the foreign exchange market

A brilliant marketing campaign by Italian manufacturers increases U.S. consumers desire for Italian shoes. This causes in the marginal propensity to import in the U.S.

Adjust the following graph to illustrate the effect of the change in consumers preferences for imports on the foreign exchange market.

Demand for U.S. dollarsSupply of U.S. dollarsVALUE OF CURRENCY IN THE FX MARKETQUANTITY OF CURRENCYDemand for U.S. dollars Supply of U.S. dollars

Which of the following factors would cause for a change in the supply of U.S. dollars? Check all that apply.

Foreign firms selling more of their goods to Americans

The Federal Reserve buying U.S. dollars in the foreign exchange market

Foreigners investing in the United States

Americans investing abroad