The Figure Given Below Depicts the Demand and Supply of Brazilian

question 97

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

-In 1991, the French mineral water Perrier was temporarily taken off the market in the United States because of suspected impurities. Other things equal, this action brought about:

• A)an increase in the demand for Perrier.
• B)a decrease in the price of Perrier in terms of French francs.
• C)a depreciation of the French franc relative to the U.S. dollar.
• D)an appreciation of the French franc relative to the U.S. dollar.
• E)an increase in the supply of dollars in the foreign exchange market.

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