EXCHANGE RATE (Dollars per euro) The following graph shows the short-run supply schedule (S,) and demand schedule (D) for the euro. S, denotes the long-run supply schedule of euros. The initial equilibrium exchange rate is $1.20 per euro. Suppose that the demand for euros increases to D,. On the graph, use the tan point (dash symbol) to indicate the short-run equilibrium exchange rate. Then use the grey point (star symbol) to indicate the long-run equilibrium exchange rate. Note: Dashed drop lines will automatically extend to both axes. The following graph shows the short-run supply schedule (So) and demand schedule (Do) for the euro. Si denotes the long-run supply schedule of euros. The initial equilibrium exchange rate is $1.20 per euro. Suppose that the demand for euros increases to D1. On the graph, use the tan point (dash symbol) to indicate the short-run equilibrium exchange rate. Then use the grey point (star symbol) to indicate the long-run equilibrium exchange rate. Note: Dashed drop lines will automatically extend to both axes. 27 24 21 14 15 . 106 120 136 150 QUANTITY (Euros) Short Run Equilibrium Long-Run Equilibrium Referring The price of U.S. exports decreases, and the quantity of U.S. exports demanded increases. of the ev Step 1. 2. 345 The dollar depreciates to $2.10 per euro. The dollar appreciates to $1.50 per euro. The quantity of euros supplied increases. The supply schedule of euros becomes more elastic, as shown by $1.
EXCHANGE RATE (Dollars per euro) The following graph shows the short-run supply schedule (S,) and demand schedule (D) for the euro. S, denotes the long-run supply schedule of euros. The initial equilibrium exchange rate is $1.20 per euro. Suppose that the demand for euros increases to D,. On the graph, use the tan point (dash symbol) to indicate the short-run equilibrium exchange rate. Then use the grey point (star symbol) to indicate the long-run equilibrium exchange rate. Note: Dashed drop lines will automatically extend to both axes. The following graph shows the short-run supply schedule (So) and demand schedule (Do) for the euro. Si denotes the long-run supply schedule of euros. The initial equilibrium exchange rate is $1.20 per euro. Suppose that the demand for euros increases to D1. On the graph, use the tan point (dash symbol) to indicate the short-run equilibrium exchange rate. Then use the grey point (star symbol) to indicate the long-run equilibrium exchange rate. Note: Dashed drop lines will automatically extend to both axes. 27 24 21 14 15 . 106 120 136 150 QUANTITY (Euros) Short Run Equilibrium Long-Run Equilibrium Referring The price of U.S. exports decreases, and the quantity of U.S. exports demanded increases. of the ev Step 1. 2. 345 The dollar depreciates to $2.10 per euro. The dollar appreciates to $1.50 per euro. The quantity of euros supplied increases. The supply schedule of euros becomes more elastic, as shown by $1.
Chapter29: International Finance
Section: Chapter Questions
Problem 8P
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Transcribed Image Text:EXCHANGE RATE (Dollars per euro)
The following graph shows the short-run supply schedule (S,) and demand schedule (D) for the euro. S, denotes the
long-run supply schedule of euros. The initial equilibrium exchange rate is $1.20 per euro. Suppose that the demand for
euros increases to D,. On the graph, use the tan point (dash symbol) to indicate the short-run equilibrium exchange
rate. Then use the grey point (star symbol) to indicate the long-run equilibrium exchange rate. Note: Dashed drop lines
will automatically extend to both axes.
The following graph shows the short-run supply schedule (So) and demand schedule (Do) for the
euro. Si denotes the long-run supply schedule of euros. The initial equilibrium exchange rate is
$1.20 per euro.
Suppose that the demand for euros increases to D1.
On the graph, use the tan point (dash symbol) to indicate the short-run equilibrium exchange rate.
Then use the grey point (star symbol) to indicate the long-run equilibrium exchange rate.
Note: Dashed drop lines will automatically extend to both axes.
27
24
21
14
15
.
106 120 136 150
QUANTITY (Euros)
Short Run Equilibrium
Long-Run Equilibrium
Referring The price of U.S. exports decreases, and the quantity of U.S. exports demanded increases.
of the ev
Step
1.
2.
345
The dollar depreciates to $2.10 per euro.
The dollar appreciates to $1.50 per euro.
The quantity of euros supplied increases.
The supply schedule of euros becomes more elastic, as shown by $1.
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