The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.Figure 21.4

-Which of the following had resulted from the Smithsonian agreement of 1971?
A)Devaluation of the U.S. dollar
B)Dissolution of a fixed exchange rate regime
C)Appreciation of the U.S. dollar
D)Establishment of an equilibrium exchange rate
E)Laissez-faire in the foreign exchange market

Question

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.Figure 21.4
 
-Which of the following had resulted from the Smithsonian agreement of 1971?
A)Devaluation of the U.S. dollar 
B)Dissolution of a fixed exchange rate regime 
C)Appreciation of the U.S. dollar 
D)Establishment of an equilibrium exchange rate 
E)Laissez-faire in the foreign exchange market

Quizplus · Accepted Answer

The Smithsonian agreement of 1971 resulted in the devaluation of the U.S. dollar against other currencies by approximately 8%. This was done in an effort to correct the balance of payments deficit that the U.S. was experiencing at the time.

The Figure Below Shows the Demand (D) and Supply (S)