The Figure Given Below Depicts the Foreign Exchange Market for British

question 129

Multiple Choice

The figure given below depicts the foreign exchange market for British pounds traded for U.S.dollars. Figure 22.2
- Refer to Figure 22.2.Suppose S₁ is the initial supply curve and the British demand for U.S.manufactured computers decreases.Then,with flexible exchange rates:

• A)the price per British pound decreases by $0.10 and the quantity of British pounds increases by 50.
• B)the price per British pound decreases by $0.10 and the quantity of British pounds decreases by 50.
• C)the price per British pound increases by $0.15 and the quantity of British pounds decreases by 50.
• D)the price per British pound increases by $0.15 and the quantity of British pounds decreases by 75.
• E)the price per British pound and the quantity of British pounds remain unchanged.

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Definitions:

Equilibrium Quantity

The amount of goods or services that are bought and sold at the equilibrium price, where market demand meets market supply.

Consumer Surplus

The discrepancy between the total sum consumers are prepared and able to spend on a good or service and what they ultimately pay.

Equilibrium Price

The market price at which the quantity of goods supplied equals the quantity of goods demanded.

Equilibrium Quantity

The quantity of goods or services supplied that equals the quantity demanded at the market equilibrium price.