Figure 11.1. Supply and Demand Schedules of Francs

-Refer to Figure 11.1.Suppose the exchange rate is $.30 per franc.At this exchange rate, there is an ____ of francs, which leads to a ____ in the dollar price of the franc, a(n) ____ in the quantity of francs supplied, and a(n) ____ in the quantity of francs demanded.

Question

Figure 11.1. Supply and Demand Schedules of Francs
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-Refer to Figure 11.1.Suppose the exchange rate is $.30 per franc.At this exchange rate, there is an ____ of francs, which leads to a ____ in the dollar price of the franc, a(n) ____ in the quantity of francs supplied, and a(n) ____ in the quantity of francs demanded.

Quizplus · Accepted Answer

When there is an excess demand for francs at a given exchange rate, it means that the demand for francs exceeds the supply at that rate. This situation leads to a rise in the dollar price of the franc as buyers are willing to pay more to obtain the francs they desire. As the price rises, the quantity of francs supplied increases because suppliers are more willing to exchange francs for dollars at higher prices. Conversely, the quantity of francs demanded decreases because buyers are less willing to exchange dollars for francs at higher prices.