Chapter 8R, Problem 12MCQ

To determine

To find:

Depiction of depreciation on graph.

Answer to Problem 12MCQ

Option B is correct.

Explanation of Solution

Option B is correct.

A movement of the equilibrium exchange rate to 1 shows depreciation of the bern on the graph.

Option A is incorrect as it shows appreciation of currency.

Option C is incorrect as decrease in equilibrium quantity of berns do not show depreciation of currency.

Option D is incorrect as rightward shift in equilibrium quantity of berns do not show depreciation of currency.

Option E is incorrect as leftward shift in equilibrium quantity of berns do not show depreciation of currency.

Economics Concept Introduction

The exchange rate of a national currency is determined by its relative demand and supply in the foreign exchange market. For example, the price of Yuan in U.S.