The Exchange Rate Is Determined by Demand and Supply

question 105

Multiple Choice

The exchange rate is determined by demand and supply. The demand for dollars is directly (positively) related to

• A)increases in U.S. income.
• B)increases in foreign income.
• C)increases in the U.S. price of foreign goods relative to the foreign price of foreign goods.
• D)increases in foreign interest rates relative to U.S. interest rates.

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Definitions:

Supply S2

Represents a shift in the supply curve in the market, indicating a change in the quantity of goods that suppliers are willing to produce and sell.

Equilibrium Wage

The rate of pay where the demand for labor from employers is equal to the labor supply from workers.

Unions

Organizations formed by workers to protect their rights and interests, often engaging in collective bargaining with employers.

Low Cost

Refers to products or services offered at a price lower than the average in the market, aiming to attract cost-conscious customers.