The Figure Given Below Depicts the Demand and Supply of Brazilian

question 84

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. If the initial equilibrium exchange rate is 6 pesos per real, then other things equal, a decrease in the number of Brazilian tourists to Mexico would:

• A)increase the demand for Brazilian reals from D₂ to D₁ and increase the exchange rate to 8 pesos per real.
• B)decrease the supply of Brazilian reals from S₁ to S₂ and increase the exchange rate to 8 pesos per real.
• C)decrease the supply of Brazilian reals from S₁ to S₂ and increase the exchange rate to 10 pesos per real.
• D)decrease the demand for Brazilian reals from D₁ to D₂ and increase the exchange rate to 8 pesos per real.
• E)decrease the supply of Brazilian reals from S₁ to S₂ and increase the demand for Brazilian reals from D₂ to D₁, thereby changing the exchanging rate to 10 pesos per real.

---

Definitions:

Marginal Benefit Curve

The Marginal Benefit Curve is a graphical representation showing how the benefit or utility from consuming each additional unit of a good decreases as more units are consumed.

Government Intervention

Regulatory actions taken by a government in order to affect or interfere with decisions made by individuals, groups, or organizations regarding economic and social matters.

Marginal Cost

The cost of producing one additional unit of a product or service.

Society's Welfare

The overall well-being and quality of life of a community or society, influenced by economic, social, and environmental factors.