If the Swiss demand for dollars is elastic,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

When a currency depreciates against another, it becomes relatively cheaper, making imports more expensive and exports cheaper. Therefore, if the Swiss demand for dollars is elastic, it means that they are sensitive to changes in price. Hence, a depreciation of the dollar against the franc will make it cheaper for Swiss buyers to acquire dollars, and this will lead to a greater quantity of francs being supplied to the foreign exchange market to obtain dollars.

If the Swiss Demand for Dollars Is Elastic,a Depreciation of the Dollar