Figure 15.1 shows the market for the Swiss franc. In the figure, the initial demand for marks and supply of marks are depicted by D0 and S0 respectively.
Figure 15.1. The Market for the Swiss Franc
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-Refer to Figure 15.1.Suppose the United States _decreases investment spending in Switzerland, thus reducing the demand for francs from D₀ to D₂.Other things equal, under a floating exchange rate system, the new equilibrium exchange rate would be

Question

Figure 15.1 shows the market for the Swiss franc. In the figure, the initial demand for marks and supply of marks are depicted by D0 and S0 respectively.
Figure 15.1. The Market for the Swiss Franc
?

-Refer to Figure 15.1.Suppose the United States _decreases investment spending in Switzerland, thus reducing the demand for francs from D₀ to D₂.Other things equal, under a floating exchange rate system, the new equilibrium exchange rate would be

Quizplus · Accepted Answer

A decrease in investment spending in Switzerland by the United States would reduce the demand for francs, shifting the demand curve to the left. This would result in a lower equilibrium exchange rate, assuming supply remains constant. $0.40 per franc indicates a depreciation of the franc relative to the dollar.

Figure 151 Shows the Market for the Swiss Franc