The following diagram is a flexible exchange market for foreign currency: Refer to the diagram.At the price $.80 for 1 euro:

Question

The following diagram is a flexible exchange market for foreign currency:  Refer to the diagram.At the price $.80 for 1 euro:

Quizplus · Accepted Answer

At the price $.80 for 1 euro, the quantity of euros demanded equals the quantity supplied. This is the point of equilibrium in the market where the forces of demand and supply are balanced, and there is no surplus or shortage of currency. Therefore, Option A is the correct answer. Option B is incorrect because the stability of the exchange rate is not determined by one specific price point, but by the overall trend of the market. Option C is incorrect because it is a tautology and does not provide any useful information. Option D is incorrect because there will be no surplus of euros at the equilibrium point.

The Following Diagram Is a Flexible Exchange Market for Foreign