The Figure Given Below Depicts the Foreign Exchange Market for British

question 96

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.An increase in the equilibrium quantity of British pounds from 300 to 350 would most likely mean that:

• A)the demand for British pounds has decreased.
• B)the supply of British pounds has decreased.
• C)increased demand for dollars has caused the dollar to depreciate and the pound to appreciate.
• D)increased demand for dollars has caused the dollar to appreciate and the pound to depreciate.
• E)the equilibrium exchange rate is $1.60 per British pound.

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Definitions:

Allocative Efficiency

A state of the economy where resources are allocated in a way that maximizes the overall welfare or utility of consumers.

Average Cost

The total cost divided by the number of goods produced, representing the cost per unit of output.

Long Run

A period of time in economics during which all factors of production and costs are variable, allowing for full adjustment to changes.

Short Run

Period of time in which quantities of one or more production factors cannot be changed.