Fewer foreign students want to study there. This would cause its currency to:

Question

BlackTom AI · Accepted Answer

A fall in foreign students reduces foreigners’ demand for the domestic currency (they no longer need it to pay tuition, rent, living costs), so the currency will tend to lose value over time — depreciate in the long run.

1) Relevant knowledge points and concepts
- Foreign exchange demand: foreign purchasers (including foreign students) create demand for the host country’s currency to pay for goods and services priced in that currency. 
- Supply and demand in the FX market: a leftward shift of the demand curve for a currency lowers its equilibrium price (the currency depreciates). 
- Short-run vs long-run adjustment: sticky prices, capital mobility, and central bank intervention can mute immediate effects; persistent changes in demand produce long-run exchange rate changes.

2) Step-by-step reasoning
- Fewer foreign students → fewer USD (or domestic currency) purchases by foreigners to pay tuition/living expenses. 
- In the foreign exchange market this is a reduction in demand for the domestic currency (demand curve shifts left).
- With supply unchanged, the new equilibrium has a lower value of the domestic currency relative to foreign currencies (depreciation).
- If the reduction is persistent, the depreciation will materialize in the long run; short-run responses may be muted by sticky prices, reserves, or capital flows.

3) Intermediate steps / no numerical calculation required
- Initial demand: D0. New demand: D1 = D0 − ΔD (ΔD > 0). 
- Equilibrium exchange rate E0 moves to E1 < E0 (domestic currency weaker). This demonstrates depreciation.

4) Why the correct answer is correct
- The essential mechanism is lower foreign demand for the currency; persistent lower demand reduces the currency’s value. Long-run designation recognizes that full market adjustment and price-level changes take time.

5) Why the other options are incorrect
- “Appreciate in long run” and “appreciate in short run”: contradict the basic demand-channel logic—less foreign demand cannot cause appreciation. 
- “Depreciate in short run”: possible, but less precise because short-run exchange rates can be buffered by intervention, sticky prices, or offsetting capital flows; the persistent fall in demand more reliably causes long-run depreciation.

6) Conclusion
The correct outcome is that the currency will depreciate in the long run, which matches the provided answer: depreciate in long run.

Fewer foreign students want to study there. This would cause its currency to:单项选择题

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