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 21.1 In the figure:
D₁ and D₂: Demand for Brazilian reals
S₁ and S₂: Supply of Brazilian reals
Refer to Figure 21.1.Assume that the initial equilibrium exchange rate is 8 Mexican pesos per Brazilian real and 150 brazilian reals are traded in the market.Suppose, there is an increase in the Brazilian demand for Mexican exports.Other things remaining equal, which of the following can be concluded?

• A)The demand curve for Brazilian reals will shift to the the right.
• B)The supply curve of Brazilian reals will shift to the the right.
• C)The Mexican pesos will depreciate in value.
• D)The Brazilian reals will appreciate in value.
• E)Around 100 Brazilian reals will be traded in the forex market.

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Definitions:

Contribution Margin

The contribution margin represents the portion of sales revenue that is not consumed by variable costs and is available to cover fixed costs and generate profit.

Variable Cost

Business expenditures that adjust based on the activity level of the enterprise.

Operating Cash Flow

The cash generated from a company's normal business operations, indicating whether a company can maintain or grow its operations.

Required Rate

The minimum annual percentage return that an investment must earn to be considered acceptable to an investor, also known as the required rate of return.