A rightward shift in the DD curve for dollars will lead to :

(A) Appreciation of domestic currency

(B) Depreciation of domestic currency

(C) Increase in exports

(D) Increase in imports

(E) Increase in foreign direct investment

Choose the correct answer from the options given below :

(B), (C) and (E) Only

The correct answer is option (1) : (B), (C) and (E) Only

A rightward shift in the DD (Demand for Dollars) curve implies an increase in the demand for the dollars which in turn will result in depreciation of the domestic currency. The increase in demand of dollars may be due to increase in demand for foreign goods and services.

(A) Appreciation of domestic currency : This is incorrect as the shift implies depreciation of domestic currency.

(B) Depreciation of domestic currency : This is correct.

(C) Increase in exports : This is correct. Depreciation of the domestic currency makes the country's exports cheaper for foreign buyers, potentially leading to an increase in exports

(D) Increase in imports : This is incorrect. Strong dollar will make imports expensive and hence there will be a decline in imports as a result of dollar appreciation.

(E) Increase in foreign direct investment : Depreciation of the domestic currency can make domestic assets cheaper for foreign investors, potentially leading to an increase in foreign direct investment. This option is correct.