The Figure Given Below Depicts the Demand and Supply of Brazilian

question 125

Multiple Choice

The figure given below depicts the demand and supply of Brazilian reals in the foreign exchange market. Assume that the market operates under a flexible exchange rate regime.
Figure 21.1

In the figure:
D₁ and D₂: Demand for Brazilian reals
S₁ and S₂: Supply of Brazilian reals

-Refer to Figure 21.1. Assume that the initial equilibrium exchange rate is 6 pesos per real. Other things remaining equal, an increase in the number of Brazilian tourists to Mexico is most likely to:

• A) keep the equilibrium exchange rate constant.
• B) shift the demand curve for pesos to the right.
• C) shift the supply curve of pesos to the left.
• D) shift the demand curve for pesos to the left.
• E) shift the supply curve of pesos to the right.

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