Figure 15.1 shows the market for the Swiss franc.In the figure,the initial demand for marks and supply of marks are depicted by D0 and S0 respectively.
Figure 15.1.The Market for the Swiss Franc

-Refer to Figure 15.1.Suppose that the United States increases its imports from Switzerland,resulting in a rise in the demand for francs from D0 to D1.Under a floating exchange rate system,the new equilibrium exchange rate would be:

Question

Figure 15.1 shows the market for the Swiss franc.In the figure,the initial demand for marks and supply of marks are depicted by D0 and S0 respectively.
Figure 15.1.The Market for the Swiss Franc
 
-Refer to Figure 15.1.Suppose that the United States increases its imports from Switzerland,resulting in a rise in the demand for francs from D0 to D1.Under a floating exchange rate system,the new equilibrium exchange rate would be:

Quizplus · Accepted Answer

When the demand for francs increases from D0 to D1, the demand curve shifts to the right. This causes the equilibrium exchange rate to increase from $0.50 per franc to $0.60 per franc, as shown by the intersection of D1 and S0 curves. Therefore, the correct answer is (C) $0.60 per franc.

Figure 151 Shows the Market for the Swiss Franc