Assume That the Vertical Axis of the Graph for the Foreign

question 73

Multiple Choice

Assume that the vertical axis of the graph for the foreign exchange market measures the exchange rate in euros per dollar. As the exchange rate rises

• A) American products become more attractive and more dollars are desired.
• B) the euro can buy more dollars.
• C) American goods become less attractive and fewer dollars are demanded.
• D) the dollar depreciates against the euro.

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Definitions:

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive in the market.

Consumer Surplus

The gap between the price consumers are ready to offer for a good or service and the effective amount they spend on it.

Trade

The process of purchasing, vending, or trading products and services among individuals or nations.

Factor Endowments

The amount of land, labor, capital, and entrepreneurship that a country or region possesses, which determines its comparative advantage in international trade.