Figure 15.3 Alt text for Figure 15.3: In figure 15.3, a graph illustrates the quantity of bahts traded against the exchange rate.
Long description for Figure 15.3: The x-axis is labelled, quantity of bahts traded, with value 180 marked.The y-axis is labelled exchange rate, Canadian dollar against the baht, with value 0.03 marked.A straight line supply curve, S, slopes up from the bottom left corner to the top right corner.A straight line demand curve, D, slopes down from the top left corner to the bottom right corner.Curves S and D intersect at point (160, 0.30), which is connected to the corresponding x and y-axes values with dotted lines.
-Refer to Figure 15.3.At what level should the Thai government peg its currency to the dollar to make Thai exports cheaper to Canada?

Question

Figure 15.3  Alt text for Figure 15.3: In figure 15.3, a graph illustrates the quantity of bahts traded against the exchange rate.
Long description for Figure 15.3: The x-axis is labelled, quantity of bahts traded, with value 180 marked.The y-axis is labelled exchange rate, Canadian dollar against the baht, with value 0.03 marked.A straight line supply curve, S, slopes up from the bottom left corner to the top right corner.A straight line demand curve, D, slopes down from the top left corner to the bottom right corner.Curves S and D intersect at point (160, 0.30), which is connected to the corresponding x and y-axes values with dotted lines.
-Refer to Figure 15.3.At what level should the Thai government peg its currency to the dollar to make Thai exports cheaper to Canada?

Quizplus · Accepted Answer

To make Thai exports cheaper to Canada, the Thai government should peg its currency to the dollar at a lower exchange rate than the current exchange rate of 0.03 Canadian dollars per baht. This would shift the demand curve for baht to the right, increasing the quantity of bahts traded, and ultimately lowering the exchange rate to a level that makes Thai exports more affordable for Canadian consumers. Therefore, the best choice is B, less than $.03/baht.

Figure 153 Alt Text for Figure 15