Figure 15.1 shows the market for the Swiss franc. In the figure, the initial demand for marks and supply of marks are depicted by D0 and S0 respectively.
Figure 15.1. The Market for the Swiss Franc
?
-Refer to Figure 15.1.With a system of floating exchange rates, the equilibrium exchange rate is
A) $0.40 per franc.
B) $0.50 per franc.
C) $0.60 per franc.
D) $0.70 per franc.

Question

Figure 15.1 shows the market for the Swiss franc. In the figure, the initial demand for marks and supply of marks are depicted by D0 and S0 respectively. 
Figure 15.1. The Market for the Swiss Franc
? 
-Refer to Figure 15.1.With a system of floating exchange rates, the equilibrium exchange rate is
A) $0.40 per franc. 
B) $0.50 per franc. 
C) $0.60 per franc. 
D) $0.70 per franc.

Quizplus · Accepted Answer

In a floating exchange rate system, the equilibrium exchange rate is where the supply and demand curves intersect, which is at a rate of $0.50 per franc in this case.

Figure 151 Shows the Market for the Swiss Franc