The figure given below depicts the demand and supply of Brazilian reals in the foreign exchange market.Assume that the market operates under a flexible exchange rate regime. Figure 22.1 In the figure:
D 1 and D 2 : Demand for Brazilian reals
S 1 and S 2 : Supply of Brazilian reals
-Refer to Figure 22.1.The demand curves shown for Brazilian reals are based on:
A)the supply of Brazilian reals in the market.
B)the demand for Mexican pesos.
C)Brazilian demand for Brazilian products.
D)Brazilian demand for Mexican products.
E)Mexican demand for Brazilian products.

Question

The figure given below depicts the demand and supply of Brazilian reals in the foreign exchange market.Assume that the market operates under a flexible exchange rate regime. Figure 22.1  In the figure:
D 1 and D 2 : Demand for Brazilian reals
S 1 and S 2 : Supply of Brazilian reals
-Refer to Figure 22.1.The demand curves shown for Brazilian reals are based on:
A)the supply of Brazilian reals in the market. 
B)the demand for Mexican pesos. 
C)Brazilian demand for Brazilian products. 
D)Brazilian demand for Mexican products. 
E)Mexican demand for Brazilian products.

Quizplus · Accepted Answer

The demand curves for Brazilian reals are based on the Mexican demand for Brazilian products, as foreign demand for a country's products typically influences the demand for that country's currency.

The Figure Given Below Depicts the Demand and Supply of Brazilian