The following two figures depict the demand and supply of U.S. dollars and the demand and supply of British pounds in the foreign currency exchange market. Use these figures to answer the next questions.

-Assume that the same event caused demand for U.S. dollars to decrease and demand for British pounds to increase and that both of these graphs describe that event. Approximately what is Y2 ?

Question

The following two figures depict the demand and supply of U.S. dollars and the demand and supply of British pounds in the foreign currency exchange market. Use these figures to answer the next questions.
 
-Assume that the same event caused demand for U.S. dollars to decrease and demand for British pounds to increase and that both of these graphs describe that event. Approximately what is Y2 ?

Quizplus · Accepted Answer

If demand for US dollars decreases and demand for British pounds increases, it would shift the demand curve for US dollars leftward and the demand curve for British pounds rightward. This would result in a decrease in the equilibrium exchange rate (from E1 to E2) and a decrease in the quantity of dollars exchanged for pounds (from Q1 to Q2). From the graph, Y2 is approximately $0.83.

The Following Two Figures Depict the Demand and Supply of U.S