The graph shows the demand curve for Canadian dollars.

The exchange rate is currently 90 U.S. cents per Canadian dollar. Over time, the exchange rate rises from 90 U.S. cents per dollar to 100 U.S. cents per dollar.

Show the effect in the graph. Draw either a new demand curve or an arrow along the curve showing the direction of change.

Question content area bottom left

Part 1

The law of demand for foreign exchange states that other things remaining the same, the ______ the exchange rate, the smaller is the ______ in the foreign exchange market.

A.

higher; quantity of Canadian dollars demanded

B.

lower; quantity of Canadian dollars demanded

C.

higher; demand for Canadian dollars

D.

lower; demand for Canadian dollars