If the Swiss demand for dollars is elastic, then a depreciation of the dollar against the franc will lead to a greater quantity of francs being supplied to the foreign exchange market to obtain dollars.

Question

Quizplus · Accepted Answer

If the Swiss demand for dollars is elastic, they will be more responsive to changes in the exchange rate. A depreciation of the dollar against the franc will make it relatively cheaper to purchase dollars, so the Swiss will demand more dollars. To obtain these dollars, they will supply more francs to the foreign exchange market.

If the Swiss Demand for Dollars Is Elastic, Then a Depreciation