The Figure Given Below Depicts the Demand and Supply of Brazilian

question 18

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.Suppose the initial equilibrium exchange rate is 10 pesos per real.A decrease in the Mexican demand for Brazilian coffee, other things equal, is most likely to result in a new equilibrium exchange rate of:

• A)6 pesos per real and an equilibrium quantity of 200 Brazilian reals.
• B)6 pesos per real and an equilibrium quantity of 250 Brazilian reals.
• C)8 pesos per real and an equilibrium quantity of 150 Brazilian reals.
• D)8 pesos per real and an equilibrium quantity of 100 Brazilian reals.
• E)10 pesos per real and an equilibrium quantity of 200 Brazilian reals.

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Definitions:

Quota Rent

The earnings exceeding the normal anticipated returns due to import or export quotas.

Deadweight Loss

A decrease in economic effectiveness occurring when a good or service doesn't reach its free market equilibrium.

Minimum Wage

The lowest legal hourly rate of pay that employers can compensate workers, established to protect employees from exploitation.

Equilibrium Price

The price point in the market at which the supply of goods matches the demand for those goods.