A country having stronger preferences for imports than its trading partners have for its exports finds its demand for foreign exchange rising more rapidly than its supply of foreign exchange.

Question

Quizplus · Accepted Answer

This is true according to the graph as the demand curve for Swiss Francs (representing the demand for foreign exchange to buy imports) is steeper than the supply curve (representing the supply of foreign exchange from exports). This means that a shift in preferences towards imports would lead to a greater increase in the demand for foreign exchange than the increase in the supply of foreign exchange from exports.

A Country Having Stronger Preferences for Imports Than Its Trading