Asked by Bailey McPhee on Jul 16, 2024
Verified
Consider the currency market for British pounds and U.S. dollars. An increase in the supply of British pounds
A) results in an appreciation of the pound and a depreciation of the dollar.
B) results in a depreciation of the pound and a depreciation of the dollar.
C) is equivalent to an increase in the demand for the U.S. dollar.
D) Is equivalent to a decrease in the demand for the U.S. dollar.
Currency Market
Also known as the foreign exchange market, it's a global decentralized market for the trading of currencies.
Supply of British Pounds
The total amount of British pounds (GBP) available for transactions and investment in the currency markets.
Appreciation
An increase in the value of an asset, currency, or other financial instrument over time.
- Analyze the effect of supply and demand dynamics for currencies on their market value changes.
Verified Answer
JM
James MurrayJul 23, 2024
Final Answer :
C
Explanation :
An increase in the supply of British pounds means more pounds are available for exchange into other currencies, such as the U.S. dollar. This situation is equivalent to an increase in the demand for the U.S. dollar, as more pounds are being exchanged for dollars.
Learning Objectives
- Analyze the effect of supply and demand dynamics for currencies on their market value changes.