Consider the market for dollars. If the exchange rate rises from 2 pesos per dollar to 4 pesos per dollar
A) the supply curve of dollars shifts leftward.
B) the supply curve of dollars shifts rightward.
C) there is an upward movement along the supply curve for dollars.
D) there is a downward movement along the supply curve for dollars.

Question

Quizplus · Accepted Answer

An increase in the exchange rate from 2 pesos per dollar to 4 pesos per dollar makes holding dollars more valuable in terms of pesos. This does not shift the supply curve but rather represents a movement along the supply curve due to the change in price (exchange rate), typically leading to an increase in the quantity supplied, depicted as an upward movement along the supply curve.

Consider the Market for Dollars