If the Equilibrium Exchange Rate for the Dollar Is 110

question 371

Multiple Choice

If the equilibrium exchange rate for the dollar is 110 yen per dollar and the current exchange rate is 120 yen per dollar, then the

• A) supply curve of U.S. dollars shifts rightward.
• B) dollar will depreciate.
• C) dollar will appreciate.
• D) demand curve for U.S. dollars shifts rightward.

---

Definitions:

Deadweight Loss

The loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved, often due to market failure or government intervention.

Excess Burden

The cost to society created by market inefficiency, mainly due to taxes or government policies, that causes a deviation from an optimal allocation of resources.

Mutually Beneficial Exchanges

Transactions that provide benefits to all parties involved, ensuring a win-win situation.

Excise Tax

A tax levied on specific goods, services, or transactions, often aimed at discouraging their use or raising revenue.