This Question: 1 pt 4 of 8 (6 complete) This Quiz: 8 pts possibl In the table to

Question

This Question: 1 pt 4 of 8 (6 complete) This Quiz: 8 pts possibl In the table to the right, what is the equilibrium exchange rate between the South African rand and U.S. dollars? Q of rand Q, of ran (trillion) Dollar Price of the rand 0.05 0.10 0.15 0.20 0.25 (trillion) 10 OA. 0.05 O B. 0.15 O c. 0.20 O D. 0.25 What is the situation when the dollar price of the South African rand is at 10 0.10? O A. There is a shortage of 8 trillion rand demanded. O B. There is a surplus of 0.4 trillion U.S. dollars. O C. There is a surplus of 4 trillion rand. O D. There is a shortage of 0.4 trillion rand. Click to select your answer

Explanation / Answer

The equilibrium exchange rate between U.S Dollar and South African Rand is 0.15 i.e. Option B.

It is the equilibrium exchange rate as the quantity demanded and quantity supplied is the same i.e. 5.

When the dollar price of South African rand is 0.10, the quantity demanded is 8 trillion rand and the quantity supplied is 4 trillion rand. So, the difference between the quantity demanded and the quantity supplied is 4 trillion rand. Among the given options, only option seems to be relevant. However, it would be correct if the statement of Option c was 'There is a surplus demand of 4 trillion rand'.

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