Use the Following to Answer Questions

question 47

Multiple Choice

Use the following to answer questions .
Exhibit: A Fixed Exchange Rate
-(Exhibit: A Fixed Exchange Rate) Suppose the exchange rate between the dollar and the British pound is fixed at £0.3 per dollar. Now suppose U.S. residents choose to purchase more British goods and services. Under the terms of the Bretton Woods Agreement, what must happen to bring the exchange rate back to £0.3 per dollar?

• A) Either the Fed or the Bank of England (Britain's central bank) will be required to increase the demand for dollars by purchasing dollars.
• B) Either the Fed or the Bank of England (Britain's central bank) will be required to decrease the supply of dollars by purchasing dollars.
• C) Either the Fed or the Bank of England (Britain's central bank) will be required to decrease the demand for dollars by purchasing British pounds.
• D) Either the Fed or the Bank of England (Britain's central bank) will be required to increase the supply of dollars by purchasing British pounds.

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Definitions:

Indorsed in Blank

A signature on a negotiable instrument like a check, making it payable to whoever holds the instrument, without naming a specific endorsee.

Holder in Due Course

A party that has acquired a negotiable instrument in good faith and for value, granting them certain protections and rights under the law.

Bearer Instrument

A financial document that is not registered in the name of any owner and thus the physical holder has the right to the document's value or benefit.

Signature

A handwritten or digitally produced mark made by an individual to signify agreement, approval, or identity.