Figure 14-2

-Refer to Figure 14-2. If the real exchange rate is .6, then there is a
A) surplus of 100 so the real exchange rate will fall.
B) surplus of 100 so the real exchange rate will rise.
C) shortage of 100 so the real exchange rate will fall.
D) shortage of 100 so the real exchange rate will rise.

Question

Figure 14-2
 
-Refer to Figure 14-2. If the real exchange rate is .6, then there is a
A) surplus of 100 so the real exchange rate will fall. 
B) surplus of 100 so the real exchange rate will rise. 
C) shortage of 100 so the real exchange rate will fall. 
D) shortage of 100 so the real exchange rate will rise.

Quizplus · Accepted Answer

A shortage of 100 implies that demand exceeds supply at the real exchange rate of 0.6, leading to upward pressure on the exchange rate.

Figure 14-2 -Refer to Figure 14-2. If the Real Exchange Rate Is