Refer to the information provided in Figure 34.4 below to answer the question(s) that follow. Figure 34.4
-Refer to Figure 34.4. The demand and supply of pounds are D₁ and S₁. If the supply shifts to S₂ and demand remains unchanged at D₁

Question

Refer to the information provided in Figure 34.4 below to answer the question(s) that follow.

Figure 34.4
-Refer to Figure 34.4. The demand and supply of pounds are D₁ and S₁. If the supply shifts to S₂ and demand remains unchanged at D₁

Quizplus · Accepted Answer

When the supply of pounds increases (shifts to S₂), the quantity of pounds demanded stays the same while the quantity supplied increases. This leads to a surplus of pounds, which causes the value of pounds to decrease and the value of dollars to increase. Therefore, the dollar depreciates and the equilibrium quantity of pounds decreases.

Refer to the Information Provided in Figure 34