The Figure Given Below Depicts the Demand and Supply of Brazilian

question 14

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 36.1 In the figure:
D₁ and D₂: Demand for Brazilian reals
S₁ and S₂: Supply of Brazilian reals
Refer to Figure 36.1.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)shift the supply curve of pesos to the right.

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Definitions:

Net Income

The total earnings of a company after subtracting all expenses from revenues, including taxes and interest.