Answer (D) is correct . Citizens with higher incomes look for new consumption opportunities in other countries, driving up the demand for those currencies. Thus, as incomes rise in one country, the prices of foreign currencies rise as well.
Answer (A) is incorrect because A shift to the right would be caused by a foreign government removing, not placing, restrictions on the importation of the country’s goods.
Answer (B) is incorrect because A shift to the right would be caused by a rise, not a fall, in the country’s interest rates.
Answer (C) is incorrect because As a country’s inflation rate rises, its currency loses purchasing power and investors move their capital elsewhere, driving demand for the country’s currency down.
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