Figure 6-1

-In Figure 6-1 above,an increase in autonomous imports will cause the ________ dollars to ________ and the exchange rate to ________,ceteris paribus.

Question

Figure 6-1
 
-In Figure 6-1 above,an increase in autonomous imports will cause the ________ dollars to ________ and the exchange rate to ________,ceteris paribus.

Quizplus · Accepted Answer

An increase in autonomous imports will increase the demand for foreign currency, which will shift the supply curve of dollars to the left (S₀ to S₁). This will lead to a fall in the exchange rate, as there will be a lower quantity of dollars supplied in the foreign exchange market. Ceteris paribus means that all other factors remain constant.

Figure 6-1 -In Figure 6-1 Above,an Increase in Autonomous Imports Will Cause