Figure 19-2
-Refer to Figure 19-2. If the real exchange rate is .6, then there is a
A)surplus of 100 so the real exchange rate will fall.
B)surplus of 100 so the real exchange rate will rise.
C)shortage of 100 so the real exchange rate will fall.
D)shortage of 100 so the real exchange rate will rise.

Question

Figure 19-2 
-Refer to Figure 19-2. If the real exchange rate is .6, then there is a
A)surplus of 100 so the real exchange rate will fall. 
B)surplus of 100 so the real exchange rate will rise. 
C)shortage of 100 so the real exchange rate will fall. 
D)shortage of 100 so the real exchange rate will rise.

Quizplus · Accepted Answer

A shortage of 100 implies that demand exceeds supply at the current real exchange rate of 0.6, causing upward pressure on the exchange rate.

Figure 19-2 -Refer to Figure 19-2. If the Real Exchange Rate Is