Which of the following is consistent with moving from a surplus to equilibrium in the market for foreign-currency exchange?
A)the exchange rate appreciates making domestic goods relatively more expensive.
B)the exchange rate appreciates making domestic goods relatively less expensive.
C)the exchange rate depreciates making domestic goods relatively more expensive.
D)the exchange rate depreciates making domestic goods relatively less expensive.

Question

Quizplus · Accepted Answer

When moving from a surplus to equilibrium in the foreign-currency exchange market, the exchange rate depreciates, making domestic goods relatively less expensive, which increases demand for domestic goods and helps eliminate the surplus.

Which of the Following Is Consistent with Moving from a Surplus