If the Swiss demand for dollars is elastic, then an appreciation 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, it means that they are more responsive to changes in the exchange rate. An appreciation of the dollar against the franc will increase the price of francs in terms of dollars, making it more expensive for the Swiss to buy dollars. As a result, they may choose to supply more francs to the foreign exchange market in order to obtain the dollars they need, leading to a greater quantity of francs being supplied.

If the Swiss Demand for Dollars Is Elastic, Then an Appreciation