Use the following diagram to answer the following questions.
-Refer to Exchange Rate. Suppose the exchange rate is currently E₃. In this case, there is:
A) an excess demand for dollars and the exchange rate will fall.
B) an excess demand for dollars and the exchange rate will increase.
C) an excess supply of dollars and the exchange rate will fall.
D) an excess supply of dollars and the exchange rate will increase.
Correct Answer:
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