Question

The equilibrium exchange rate in the foreign exchange market is determined when a the supply of foreign exchange remains constant b the demand for foreign exchange remains constant c the demand for foreign exchange becomes equal to the supply of foreign exchange d the demand for foreign exchange is greater than the supply of foreign exchange e the demand for foreign exchange is less than the supply of foreign exchange

          The equilibrium exchange rate in the foreign exchange market is determined when
 a
the supply of foreign exchange remains constant
 b
the demand for foreign exchange remains constant
 c
the demand for foreign exchange becomes equal to the supply of foreign exchange
 d
the demand for foreign exchange is greater than the supply of foreign exchange
 e
the demand for foreign exchange is less than the supply of foreign exchange
        
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Added by Terrance K.

Principles of Economics
Principles of Economics
Gregory Mankiw 8th Edition
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The equilibrium exchange rate in the foreign exchange market is determined when a the supply of foreign exchange remains constant b the demand for foreign exchange remains constant c the demand for foreign exchange becomes equal to the supply of foreign exchange d the demand for foreign exchange is greater than the supply of foreign exchange e the demand for foreign exchange is less than the supply of foreign exchange
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Transcript

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00:01 Okay, yes, so first, part a, we have that demand rises and supply is constant.
00:05 So we have that equilibrium price increases and equilibrium quantity also increases.
00:19 For b, we have that what? supply rises and demand is constant.
00:24 So equilibrium price decreases and equilibrium quantity is going to increase.
00:38 For c, we have that a decrease in demand and increase in supply.
00:42 So the equilibrium price is going to, well, decrease because the effect on price will be determined by the relative magnitude of the shifts.
00:52 But generally, we can expect a decrease.
00:54 So generally, the equilibrium price generally decreases.
00:59 And then the equilibrium quantity, well, it's really going to be ambiguous here depending on the magnitude of the shifts...
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