The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2

-A permanent shift in the foreign exchange market supply and demand curves such that the fixed exchange rate is no longer an equilibrium rate is referred to as:
A)permanent devaluation.
B)speculative disequilibrium.
C)permanent revaluation.
D)speculative equilibrium.
E)fundamental disequilibrium.

Question

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2
 
-A permanent shift in the foreign exchange market supply and demand curves such that the fixed exchange rate is no longer an equilibrium rate is referred to as:
A)permanent devaluation. 
B)speculative disequilibrium. 
C)permanent revaluation. 
D)speculative equilibrium. 
E)fundamental disequilibrium.

Quizplus · Accepted Answer

A permanent shift in the foreign exchange market supply and demand curves that renders the fixed exchange rate as no longer an equilibrium rate is known as fundamental disequilibrium. Permanent devaluation (choice A) refers to a decrease in the value of a country's currency relative to another currency, while permanent revaluation (choice C) refers to an increase in the value. Speculative disequilibrium (choice B) and speculative equilibrium (choice D) do not describe a permanent shift in the supply and demand curves.

The Figure Given Below Depicts the Foreign Exchange Market for British