There is a large increase in the global demand for roses and Columbia is the big
ID: 1250133 • Letter: T
Question
There is a large increase in the global demand for roses and Columbia is the biggest producer of roses. At the same time, the central bank of Columbia increases the interest rate. What happens in the foreign exchange market for Columbian pesos to...A. The demand for pesos?
B. The supply of pesos?
C. The quantity of pesos demanded?
D. The quantity of pesos supplies?
E. The exchange rate of the pesos against the US dollar?
*** I am very confused on this one... any help would be appreciated. thank you!
Explanation / Answer
a) Increases because people need pesos to pay for the roses. b) Increases because people want to supply pesos to take advantage of the higher interest rates. c) Increases due to the higher supply. d) increases due to the higher demand. e) can't determine because the higher supply tends to push the rate down and the higher demand tends to push it up and we don't know which one is larger.
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