The figure below illustrates the supply and demand schedules of Swiss francs in a market of freely-floating exchange rates.
Figure 12.1 The Market for Francs

-Refer to Figure 12.1.Should the U.S.price level rise relative to the Swiss price level,there would occur a (an):

Question

The figure below illustrates the supply and demand schedules of Swiss francs in a market of freely-floating exchange rates.
Figure 12.1 The Market for Francs
 
-Refer to Figure 12.1.Should the U.S.price level rise relative to the Swiss price level,there would occur a (an):

Quizplus · Accepted Answer

If the U.S. price level rises relative to the Swiss price level, U.S. goods become more expensive compared to Swiss goods. This would lead to an increase in the demand for francs (to buy Swiss goods) and a decrease in the supply of francs (as fewer Swiss would buy U.S. goods), resulting in the depreciation of the dollar.

The Figure Below Illustrates the Supply and Demand Schedules of Swiss