When the price of foreign currency (the exchange rate) is above the equilibrium level ?
Correct answer: A. an excess supply of that currency exists in the foreign exchange market
- A. an excess supply of that currency exists in the foreign exchange market
- B. an excess demand for that currency exists in the foreign exchange market
- C. the supply of foreign exchange shifts outward to the right
- D. the supply of foreign exchange shifts backward to the left
Explanation
When the exchange-rate price is above equilibrium, sellers offer more of the currency than buyers want, creating excess supply. Market pressure then pushes the currency price downward.
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