If the exchange rate is too high in the foreign exchange market,
A)there is a surplus and the exchange rate will rise.
B)there is a surplus and the exchange rate will fall.
C)exports are cheap, and the demand curve for Canadian dollars will shift rightward.
D)there is a shortage and the exchange rate will fall.
E)there is a shortage and the exchange rate will rise.

Question

Quizplus · Accepted Answer

If the exchange rate is too high, it means the currency is overvalued, leading to a surplus of the currency as supply exceeds demand. This surplus will cause the exchange rate to fall as the market seeks equilibrium.

If the Exchange Rate Is Too High in the Foreign