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Exchange Rates: Equilibrium quiz

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Termini in questo insieme (15)

  • What does the x-axis represent in the exchange rate market graph?
    The x-axis represents the quantity of U.S. dollars.
  • What does the y-axis represent in the exchange rate market graph?
    The y-axis represents the exchange rate, such as Great British Pounds per U.S. dollar.
  • Why is the demand curve for U.S. dollars downward sloping?
    Because as the value of the U.S. dollar increases, demand decreases since U.S. goods and investments become more expensive for foreigners.
  • What happens to the demand for U.S. dollars when the dollar is weak?
    Demand increases because U.S. goods and investments become cheaper for foreigners.
  • Why is the supply curve for U.S. dollars upward sloping?
    Because a higher U.S. dollar value increases supply as Americans can buy more imports and foreign investments more cheaply.
  • What happens to the supply of U.S. dollars when the dollar is weak?
    Supply decreases because imports and foreign investments become more expensive for Americans.
  • Where is the equilibrium in the exchange rate market found?
    It is found where the supply and demand curves for U.S. dollars intersect.
  • What does the equilibrium point on the exchange rate graph represent?
    It represents the equilibrium exchange rate and the equilibrium quantity of U.S. dollars exchanged.
  • How does a high U.S. dollar value affect U.S. exports?
    It decreases exports because U.S. goods become more expensive for foreigners.
  • How does a low U.S. dollar value affect U.S. imports?
    It decreases imports because foreign goods become more expensive for Americans.
  • What is the effect on foreign demand for U.S. investments when the dollar is strong?
    Foreign demand decreases because U.S. investments become more expensive for foreigners.
  • What is the effect on U.S. demand for foreign investments when the dollar is strong?
    U.S. demand increases because foreign investments become cheaper for Americans.
  • What happens to the exchange rate if the demand for U.S. dollars increases?
    The exchange rate rises, meaning the U.S. dollar appreciates.
  • What happens to the exchange rate if the supply of U.S. dollars increases?
    The exchange rate falls, meaning the U.S. dollar depreciates.
  • Does the analysis change if the supply curve is treated as fixed (vertical)?
    No, the main focus remains on changes in the exchange rate, and the results regarding appreciation or depreciation are similar.