The Figure Given Below Depicts the Equilibrium in the Foreign

question 135

Multiple Choice

The figure given below depicts the equilibrium in the foreign exchange market.
Figure 13.1

-Refer to Figure 13.1. If the current equilibrium exchange rate is E₁ what action would the Fed have to take to achieve a target exchange rate of E₂?

• A) Sell (Q₂ - Q₁) amount of U.S. dollars.
• B) Buy (Q₁ - Q₃) amount of U.S. dollars.
• C) Buy (Q₂ - Q₃) amount of U.S. dollars.
• D) Buy (Q₂ - Q₁) amount of U.S. dollars.
• E) Sell (Q₁ - Q₃) amount of U.S. dollars.

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Definitions:

Inferior Vena Cava

The large vein that carries deoxygenated blood from the lower and middle body into the right atrium of the heart.

Saphenous

Referring to veins located in the legs, particularly the great and small saphenous veins, which are often involved in varicose veins and bypass surgery.

Femoral

Femoral refers to anything pertaining to the femur or thigh bone, the longest and strongest bone in the human body.

Congestive Heart Failure

A chronic condition where the heart is unable to pump blood effectively, leading to fluid build-up in the body.