When the Equilibrium Dollar Price of a Foreign Currency Decreases

question 80

Multiple Choice

When the equilibrium dollar price of a foreign currency decreases due to changes in demand for or supply of the foreign currency,the foreign currency

• A) has appreciated.
• B) has depreciated.
• C) is overvalued.
• D) is undervalued.
• E) is devalued.

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Definitions:

Equilibrium Price

The price at which the quantity of a product demanded by consumers equals the quantity supplied by producers, leading to a balance in the market.

Demand Schedule

A chart indicating the amount of a product or service buyers are prepared and capable of buying at different price levels.

Shortage/Surplus

A state in the marketplace where the demand for a good surpasses its supply, causing a shortage, or where the supply of a product outpaces its demand, resulting in a surplus.

Demand Schedule

A chart detailing the amount of a product that buyers are ready and capable of buying at different price levels.