At the equilibrium exchange rate,
A)the demand for dollars equals the supply of dollars.
B)a shortage may exist but a surplus may not exist.
C)a surplus may exist but a shortage may not exist.
D)the quantity of dollars demanded equals the quantity of dollars supplied.
E)the Canadian dollar is trading for 100 U.S. cents per Canadian dollar.

Question

Quizplus · Accepted Answer

At the equilibrium exchange rate, the quantity of dollars demanded equals the quantity of dollars supplied. This is because the exchange rate has adjusted to a level where the demand for dollars from foreign buyers equals the supply of dollars from domestic sellers. Therefore, option D is the correct answer.

At the Equilibrium Exchange Rate