1. **Problem Statement:** We are given a graph showing the exchange rate (U.S. cents per Canadian dollar) with supply (S) and demand (D) curves. The equilibrium exchange rate is 90 cents with a quantity of 50 billion Canadian dollars per day. There is a surplus at the exchange rate of 90. 2. **Understanding Surplus:** A surplus occurs when the quantity supplied exceeds the quantity demanded at a given price. Here, the surplus is at the exchange rate of 90 cents. 3. **Equilibrium Point:** The equilibrium is where supply equals demand. At this point, the exchange rate is 90 cents and the quantity is 50 billion Canadian dollars. 4. **Interpreting the Arrows:** - Arrow 1 points leftward along the demand curve from the surplus price to equilibrium, showing quantity demanded decreases as price moves to equilibrium. - Arrow 2 points downward along the supply curve from the surplus price to equilibrium, showing quantity supplied decreases as price moves to equilibrium. 5. **Summary:** The surplus at 90 cents means suppliers want to sell more than buyers want to buy at that price. The market moves toward equilibrium where quantity supplied equals quantity demanded at 50 billion Canadian dollars and 90 cents exchange rate. No explicit formula is needed here as this is an interpretation of supply and demand curves and equilibrium.