The Figure Given Below Depicts the Demand and Supply of Brazilian

question 90

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

-Refer to Figure 22.1. Assume that the initial equilibrium exchange rate is 6 pesos per real. Other things remaining equal, an increase in the number of Brazilian tourists to Mexico is most likely to:

• A)keep the equilibrium exchange rate constant.
• B)shift the demand curve for pesos to the right.
• C)shift the supply curve of pesos to the left.
• D)shift the demand curve for pesos to the left.
• E)lower the equilibrium exchange rate.

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Definitions:

Securities Industry

A sector comprising firms and institutions that facilitate the issuance, buying, and selling of securities, like stocks and bonds, to finance businesses and investment opportunities.

Federal Government

The national government of a country, responsible for implementing and enforcing laws, and managing the country's affairs.

Equity Carve-out

A strategic corporate action where a company sells a percentage of the interest of a subsidiary to outside investors, thereby offering it publicly while retaining control.

Market Price

The current price at which an asset or service can be bought or sold.