The Figure Given Below Depicts the Demand and Supply of Brazilian

question 104

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

-Suppose you observe that with a given supply curve, the Peruvian demand for Argentinean pesos steadily decreases. This will most likely mean:

• A)the supply of Peruvian nuevos soles has increased on the foreign exchange market.
• B)the Argentinean peso will appreciate in value relative to the Peruvian nuevo sol.
• C)the Argentinean peso will depreciate in value relative to the Peruvian nuevo sol.
• D)the Peruvian demand for Argentinean goods has increased.
• E)the supply of Argentinean pesos has increased on the foreign exchange market.

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