If the Swiss demand for dollars is inelastic,an appreciation of the dollar against the franc will lead to a greater quantity of francs being supplied to the foreign exchange market to obtain dollars.

Question

Quizplus · Accepted Answer

If the Swiss demand for dollars is inelastic, it means that they do not change the quantity of dollars they want to purchase in response to changes in the exchange rate. Therefore, an appreciation of the dollar against the franc would not lead to a greater quantity of francs being supplied to the foreign exchange market to obtain dollars, as the demand for dollars remains the same. Inelastic demand means that the quantity demanded remains relatively constant despite changes in price or exchange rate.

If the Swiss Demand for Dollars Is Inelastic,an Appreciation of the Dollar