Figure 11.1. Supply and Demand Schedules of Francs

-Refer to Figure 11.1.Suppose the exchange rate is $.70 per franc.Free-market forces would lead to a(n) ____ of the dollar against the franc and a(n) ____ in U.S.international competitiveness.

Question

Figure 11.1. Supply and Demand Schedules of Francs
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-Refer to Figure 11.1.Suppose the exchange rate is $.70 per franc.Free-market forces would lead to a(n) ____ of the dollar against the franc and a(n) ____ in U.S.international competitiveness.

Quizplus · Accepted Answer

According to the supply and demand schedules, at an exchange rate of $.70 per franc, there is an excess demand for francs, causing the franc to appreciate and the dollar to depreciate. This would lead to a worsening of U.S. international competitiveness, as U.S. goods and services become relatively more expensive compared to those from France.