Refer to the Above Diagram

question 107

Multiple Choice

Refer to the above diagram.The initial demand for and supply of pesos are shown by D₁ and S₁.If the decline in Canadian imports from Mexico described in the previous question occurred under a system of flexible exchange rates:

• A)gold would flow from Mexico to Canada.
• B)the peso price of dollars would rise from 1/B pesos equals $1 to, 1/A pesos equals $1.
• C)a problem of rationing a shortage of pesos would arise in Canada.
• D)the dollar price of pesos would increase to C dollars equals 1 peso.

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Definitions:

Marginal Revenue

The extra revenue generated from the sale of an additional unit of a product or service.

Externalities

Financial repercussions impacting bystanders who are not directly involved, which can be beneficial or detrimental.

Efficient Level

Efficient Level refers to the optimal amount of production or activity that maximizes benefits or utility while minimizing costs or waste.

Impose a Tax

The act of a governing body levying a financial charge or other levy upon a taxpayer, which can affect individuals, entities, or transactions.