Question 3 1 pts The following two fgures depict the demand and supply of U.S. d

Question

Question 3 1 pts The following two fgures depict the demand and supply of U.S. dollars and the demand and supply of British pounds in the foreign currency exchange market. Use these figures to answer the following questions. Price (British pounds per U.S. dollar) £1.4- £1.2 1.8 Quantity (trillions of U.S. dollars) Price (u.S. dollar per British pound) 1.5 Quantity (trillions of British pounds) Assume that the same event caused demand for U.S. dollars to decrease and demand for British pounds to increase and that both of these graphs describe that event. Approximately what is ? $0.50 $0.71 $0.83 $1.20 O $140

Explanation / Answer

Answer :- $1.20.

As seen in the graph the demand for British pound has increased and demand for dollar has decreased, resulting in appreciation in British pound exchange rates. Thus more us dollars will be needed now to purchase one British pound. Y1 is the us dollars needed to buy British pound before its appreciation. It is $1.20, now after appreciation $1.40 will be needed to buy 1 British poumd.

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