-Refer to Figure 17-4 above.If the demand and supply of Canadian dollars are as indicated,and the current exchange rate is US$0.60,which of the following would we expect to occur?
A) The supply of Canadian dollars would shift to the right to restore equilibrium.
B) The demand for Canadian dollars would shift to the left to restore equilibrium.
C) The exchange rate would increase until it reaches US$0.75.
D) The exchange rate would further decline.
E) The exchange rate would increase until it reaches US$1.35.

Question

-Refer to Figure 17-4 above.If the demand and supply of Canadian dollars are as indicated,and the current exchange rate is US$0.60,which of the following would we expect to occur?
A) The supply of Canadian dollars would shift to the right to restore equilibrium. 
B) The demand for Canadian dollars would shift to the left to restore equilibrium. 
C) The exchange rate would increase until it reaches US$0.75. 
D) The exchange rate would further decline. 
E) The exchange rate would increase until it reaches US$1.35.

Quizplus · Accepted Answer

If the current exchange rate is below the equilibrium rate, there will be excess demand for Canadian dollars, causing the exchange rate to rise until it reaches equilibrium at US$0.75.

-Refer to Figure 17-4 Above