Choose the letter of the diagram in Figure 36.2 that represents the shift in the foreign exchange market for dollars given the following situation, ceteris paribus: A sudden, unexpected surge in inflation in the United States causes reduced purchases of U.S.goods by foreigners.

Question

Quizplus · Accepted Answer

A sudden, unexpected surge in inflation in the United States causes a decrease in the demand for U.S. goods by foreigners. This leads to a decrease in the demand for dollars, shifting the foreign exchange market for dollars to the left. Choice C represents a leftward shift in the foreign exchange market.

Choose the Letter of the Diagram in Figure 36