The figure below illustrates the supply and demand schedules of Swiss francs in a market of freely-floating exchange rates.
Figure 12.1 The Market for Francs

-Refer to Figure 12.1.Should Swiss labor productivity rise,leading to a decrease in Swiss manufacturing costs,there would occur a (an):
A) Increase in the supply of francs and a depreciation of the dollar
B) Increase in the supply of francs and an appreciation of the dollar
C) Decrease in the demand for francs and an appreciation of the dollar
D) Increase in the demand for francs and a depreciation of the dollar

Question

The figure below illustrates the supply and demand schedules of Swiss francs in a market of freely-floating exchange rates.
Figure 12.1 The Market for Francs
 
-Refer to Figure 12.1.Should Swiss labor productivity rise,leading to a decrease in Swiss manufacturing costs,there would occur a (an):
A) Increase in the supply of francs and a depreciation of the dollar 
B) Increase in the supply of francs and an appreciation of the dollar 
C) Decrease in the demand for francs and an appreciation of the dollar 
D) Increase in the demand for francs and a depreciation of the dollar

Quizplus · Accepted Answer

A decrease in Swiss manufacturing costs would make Swiss goods more competitive in the global market, leading to an increase in demand for francs and a depreciation of the dollar.

The Figure Below Illustrates the Supply and Demand Schedules of Swiss