The following two figures depict the demand and supply of U.S. dollars and the demand and supply of British pounds in the foreign currency exchange market. Use these figures to answer the next questions:
-Assume that the same event caused demand for U.S. dollars to decrease and demand for British pounds to increase and that both of these graphs describe that event. Approximately what is Y₂?

Question

The following two figures depict the demand and supply of U.S. dollars and the demand and supply of British pounds in the foreign currency exchange market. Use these figures to answer the next questions:

-Assume that the same event caused demand for U.S. dollars to decrease and demand for British pounds to increase and that both of these graphs describe that event. Approximately what is Y₂?

Quizplus · Accepted Answer

The correct answer is C because the demand for U.S. dollars decreased, which means the value of the U.S. dollar decreased, and the demand for British pounds increased, which means the value of the British pound increased. Therefore, the value of the British pound increased relative to the U.S. dollar, which means that Y2 is greater than Y1.

The Following Two Figures Depict the Demand and Supply of U.S