When there is a surplus of dollars in the foreign exchange market, O A. the demand for Canadian dollars will increase so the foreign exchange market can move into equilibrium O B. prices in Canada will fall relative to prices in the United States OC. the supply of Canadian dollars will increase so the foreign exchange market can move into equilibrium O D. the forces of supply and demand pull the foreign exchange market into equilibrium

When there is a surplus of dollars in the foreign exchange market, O A. the demand for Canadian dollars will increase so the foreign exchange market can move into equilibrium O B. prices in Canada will fall relative to prices in the United States OC. the supply of Canadian dollars will increase so the foreign exchange market can move into equilibrium O D. the forces of supply and demand pull the foreign exchange market into equilibrium

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A) Where does the market for foreign currency come from? How does this market work if we use the flexible exchange rate system? Using terms from lecture what happens to both countries currency if there is a shift of supply or demand? There were terms given that are used to describe changes in currency exchange rates, define and use these B) What is the equation used to get the U.S. price of a foreign good? If a Mexican good costs 75 pesos and the exchange rate is $2/peso what is the U.S price? C) If the demand for travel to Mexico goes down what happens to the exchange rate? Answer for the U.S. dollar and the Mexican peso. Now the demand to invest in Mexican real estate goes up, what now happens to the exchange rates?
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change rate $1.75 1.50 1.25 1.00 200 500 S d 700 900 950 1,000 S D₂ Quantity of euros traded (millions per day) 17) Refer to Figure 30-8. The equilibrium exchange rate is at A $1.25/euro. Suppose the European Central Bank pegs its currency at $1.00/euro. At the pegged exchange rate A) there is a shortage of euros equal to 200 million. B) there is a surplus of euros equal to 700 million. Othere is a shortage of euros equal to 500 million. D) there is a surplus of euros equal to 300 million.
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