Which statement is consistent with an above-the-equilibrium exchange rate of the dollar?
A) The quantity of dollars supplied is greater than the quantity demanded, and the dollar will appreciate.
B) The quantity of dollars supplied is greater than the quantity demanded, and the dollar will depreciate.
C) The quantity of dollars supplied is less than the quantity demanded, and the dollar will appreciate.
D) The quantity of dollars supplied is less than the quantity demanded, and the dollar will depreciate.

Question

Quizplus · Accepted Answer

When the exchange rate of the dollar is above the equilibrium, it means that the price at which dollars are being offered is too high, leading to a surplus of dollars in the market. This surplus indicates that the quantity of dollars supplied exceeds the quantity demanded, which typically results in the dollar depreciating to reach equilibrium.

Which Statement Is Consistent with an Above-The-Equilibrium Exchange Rate of the Dollar