Which of the following is consistent with moving from a surplus to equilibrium in the market for foreign currency exchange?
A)the exchange rate falls causing U.S.residents to import more
B)the exchange rate falls causing U.S.residents to import less
C)the exchange rate rises causing U.S.residents to import more
D)the exchange rate rises causing U.S.residents to import less

Question

Quizplus · Accepted Answer

Moving from a surplus to equilibrium in the market for foreign currency exchange involves a decrease in the exchange rate. This decrease in the exchange rate makes foreign goods relatively more expensive for U.S. residents, thus encouraging them to import less. Therefore, option B is the correct choice as it shows that the exchange rate falls, causing U.S. residents to import less, which helps the market move towards equilibrium.

Which of the Following Is Consistent with Moving from a Surplus