Exhibit 20-4 -If Switzerland Were Trying to Peg Its Exchange Rate at Exchange

question 191

Multiple Choice

Exhibit 20-4
-If Switzerland were trying to peg its exchange rate at A, in response to the shift in demand from D to D' shown in Exhibit 20-4, it would try to

• A) shift the demand curve to the right to establish equilibrium at point x
• B) shift the supply curve to the left to establish equilibrium at point x
• C) shift the supply curve to the right to establish equilibrium at point z
• D) support the new equilibrium at point y
• E) move down along its supply curve to intersect the old demand curve at point x

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Definitions:

Price

The expenditure needed to secure a product, service, or piece of property.

Price-discriminating Monopolist

A monopolist that sells the same product at different prices to different groups of consumers, usually to maximize profits by capturing consumer surplus.

Market

A place or mechanism through which buyers and sellers interact to trade goods, services, or assets, facilitating the determination of prices and the exchange of ownership.

Price Elasticity

An indicator of the sensitivity of consumer demand for a product to variations in its price, reflecting how significantly the amount of the product consumers want to buy alters with price adjustments.