The graph shows the supply and demand for the United Kingdom's currency, the pound sterling, where the price of a pound sterling is stated in terms of India's currency, the rupee. The horizontal axis shows the quantity of pound sterling that are desired and offered for exchange. The exchange rate in pounds per rupee is measured on the vertical axis. Please answer the following questions based on the graph. a. Suppose the average income of UK residents increases to 20% above the average income of Indian residents. How will this affect the market for the British pound? Move the appropriate curve in the graph to show the change. Exchange rate (rupees per pound sterling) rupees per pound sterling 0.50 0.45 0.40 0.35 -0.30 60.25 0.20 0.15 20.10 0.05 0.00 0 Supply of pounds sterling Demand for pounds sterling 20 30 40 50 60 70 80 90 Quantity of pounds sterling (in thousands) 10 What is the new equilibrium exchange rate after the change in the foreign exchange market occurs? Enter your answer exactl and do not round: if the new exchange rate is 0.08, make sure you input your answer as 0.08.
The graph shows the supply and demand for the United Kingdom's currency, the pound sterling, where the price of a pound sterling is stated in terms of India's currency, the rupee. The horizontal axis shows the quantity of pound sterling that are desired and offered for exchange. The exchange rate in pounds per rupee is measured on the vertical axis. Please answer the following questions based on the graph. a. Suppose the average income of UK residents increases to 20% above the average income of Indian residents. How will this affect the market for the British pound? Move the appropriate curve in the graph to show the change. Exchange rate (rupees per pound sterling) rupees per pound sterling 0.50 0.45 0.40 0.35 -0.30 60.25 0.20 0.15 20.10 0.05 0.00 0 Supply of pounds sterling Demand for pounds sterling 20 30 40 50 60 70 80 90 Quantity of pounds sterling (in thousands) 10 What is the new equilibrium exchange rate after the change in the foreign exchange market occurs? Enter your answer exactl and do not round: if the new exchange rate is 0.08, make sure you input your answer as 0.08.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The graph shows the supply and demand for the United Kingdom's currency, the pound sterling, where the price of a pound
sterling is stated in terms of India's currency, the rupee. The horizontal axis shows the quantity of pound sterling that are desired
and offered for exchange. The exchange rate in pounds per rupee is measured on the vertical axis. Please answer the following
questions based on the graph.
a. Suppose the average income of UK residents increases to
20% above the average income of Indian residents. How will
this affect the market for the British pound? Move the
appropriate curve in the graph to show the change.
Exchange rate (rupees per pound sterling)
rupees per pound sterling
0.50
0.45
0.40
0.35
-0.30
60.25
0.20
0.15
0.10
0.05
0.00
0
Supply of pounds sterling
10
Demand for pounds sterling
40 50 60 70 80 90
20 30
Quantity of pounds sterling (in thousands)
b. What is the new equilibrium exchange rate after the change in the foreign exchange market occurs? Enter your answer exactly
and do not round: if the new exchange rate is 0.08, make sure you input your answer as 0.08.
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