In the open-economy macroeconomic model, if there were a surplus in the market for foreign-currency exchange, the real exchange rate would appreciate.

Question

Quizplus · Accepted Answer

In the case of a surplus in the market for foreign-currency exchange, the real exchange rate would actually depreciate, as the surplus indicates that the supply of foreign currency is greater than the demand, leading to a decrease in the value of the foreign currency relative to the domestic currency.

In the Open-Economy Macroeconomic Model, If There Were a Surplus