The Figure Given Below Depicts the Demand and Supply of Brazilian

question 89

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 22.1
In the figure:
D₁ and D₂: Demand for Brazilian reals
S₁ and S₂: Supply of Brazilian reals

-Carlos Silva, a Colombian singer, goes on tour to the United States for one month, following high American demand for his live shows. Assuming that all the show's expenses are paid by the U.S. promoters, other things equal, the U.S. tour will bring about:

• A)a decreased supply of Colombian pesos in the foreign exchange market.
• B)an increased supply of American dollars in the foreign exchange market.
• C)an increased supply of Colombian pesos in the foreign exchange market.
• D)a decreased demand for Colombian pesos in the foreign exchange market.
• E)an increased demand for American dollars in the foreign exchange market.

---

Definitions:

Short-Run Market Supply

The total quantity of a good or service that producers are willing and able to sell at various prices over a short period, where some production factors are fixed.

Market Price

The price of a commodity when sold in a competitive marketplace, determined by supply and demand.

Market Demand

The total demand for a product or service aggregated across all individuals in the market at various price levels.

Short-Run Costs

Costs that vary depending on the level of production or output in the short term, where some factors of production are fixed.