If American demand for purchases of British goods has decreased, how would you expect the equilibrium exchange rate in the market for dollars to respond? Support your answer graphically

What will be an ideal response?

If Americans are demanding fewer British goods, they will trade fewer dollars in the foreign exchange market for British pounds. This decrease in the supply of dollars is represented by the shift to the left in the supply of dollars below. As the supply of dollars decreases, the equilibrium exchange rate rises (the dollar appreciates).