Consider a foreign exchange market diagram with dollars on the horizontal axis,the yen price of the dollar on the vertical axis,an upward-sloping supply curve and downward-sloping demand curve.At an exchange rate below the equilibrium rate there is an excess ________ dollars causing market pressure for ________ of the dollar.

Question

Quizplus · Accepted Answer

At an exchange rate below the equilibrium rate, there is an excess demand for dollars, which causes market pressure for the appreciation of the dollar. This is because when the price is too low, more people want to buy dollars than sell them, pushing the price up until equilibrium is reached.

Consider a Foreign Exchange Market Diagram with Dollars on the Horizontal