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d) The following figure (Figure 2.2) shows the price of foreign currency against the quantity of foreign currency. In a floating rate exchange regime, the
d) The following figure (Figure 2.2) shows the price of foreign currency against the quantity of foreign currency. In a floating rate exchange regime, the price of foreign currency would adjust according to a change in demand or supply of foreign currency. Suppose there is a decrease in demand for foreign currency, what is the effect on the price of foreign currency? You are required to provide a step-by-step analysis of the shifts and movements of the demand and supply curves. You should provide explanations for each shift or movement as well as any net change in the exchange rate. You need to copy the figure to your answer booklet, label the demand and supply curves and include your annotations of any shifts and movements on it
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