With Everything Else the Same, in the Foreign Exchange Market

question 247

Multiple Choice

With everything else the same, in the foreign exchange market the

• A) the lower the exchange rate, the smaller is the expected profit from buying dollars.
• B) larger the value of U.S. exports, the greater is the quantity of dollars demanded.
• C) lower the exchange rate, the smaller the amount of U.S. exports.
• D) the higher the exchange rate, the cheaper are U.S.- produced goods and services.

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Definitions:

Equilibrium Prices

The price at which the quantity of a good supplied is equal to the quantity demanded, leading to market balance.

Consumer Surplus

The difference in the total amount that customers are ready and financially able to invest in a good or service and the amount they truly pay.

Producer Surpluses

The difference between what producers are willing to sell their goods for and the actual price they receive.

Creative Destruction

A concept in economics implying the dismantling of long-standing practices in order to make way for innovation and advancement.