Which of these help explain why the supply curve for currency is upward-sloping? A depreciated currency causes:

Question

BlackTom AI · Accepted Answer

A depreciated domestic currency raises the domestic-price of foreign goods, which in turn drives behaviors that increase the quantity of domestic currency supplied in the foreign-exchange market—this collection of effects explains the upward-sloping supply curve.

1) Relevant concepts
- Depreciation: the domestic currency buys fewer units of foreign currency (it weakens).
- Foreign-exchange supply: quantity of domestic currency offered for sale to obtain foreign currency.
- Price effect: as the (relative) price of domestic currency changes, agents adjust sales/purchases, producing a positively sloped supply schedule.

2) Step-by-step reasoning
- If the domestic currency depreciates, each unit of foreign goods requires more domestic currency to buy. That means importers must obtain more foreign currency, so they sell more domestic currency in the FX market to buy that foreign currency.
- Because imports now cost more in domestic terms, domestic buyers purchase fewer foreign goods and services; however, the remaining transactions still require foreign currency, so importers’ need to exchange domestic for foreign currency remains active.
- Higher domestic prices for foreign goods can shift behavior (export receipts, remittances, tourism spending) so that the flow of domestic currency offered in exchange for foreign currency rises when the domestic currency is cheaper. These behavioral responses collectively increase the quantity of domestic currency supplied as the currency depreciates—hence an upward-sloping supply curve.

3) Intermediate steps / arithmetic
- No numerical calculation is required; the logic is comparative statics: depreciation → higher domestic price of imports → more domestic currency sold per unit of foreign currency demanded → greater quantity supplied of domestic currency.

4) Why the correct answer is correct
- Each listed item describes an aspect of the same causal chain: depreciation makes imports cost more; that reduces purchases of foreign goods but increases the amount of domestic currency sold to obtain any needed foreign currency; together these effects increase domestic-currency supply as the currency depreciates. Thus “all of these” captures the full explanation.

5) Why the individual option-choices alone are incomplete
- Choosing only “imports cost more” notes the price change but ignores exchange behavior; “less foreign goods will be purchased” notes demand reduction but not the resulting FX flows; “need to sell … domestic currency to get foreign currency” (the transactional mechanism) explains flows but omits demand-side effects. The combined answer covers all mechanisms.

6) Conclusion
All three statements together explain why the supply curve for (domestic) currency slopes upward when the currency depreciates. Final answer: all of these.

Which of these help explain why the supply curve for currency is upward-sloping? A depreciated currency causes:单项选择题

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