Refer to the Graph, Which Shows a Change in the Demand

question 167

Multiple Choice

Refer to the graph, which shows a change in the demand for pounds from D to D'. Under a system of flexible exchange rates, the

• A)price of a pound will increase to $3.
• B)price of a dollar will increase to 3 pounds.
• C)shortage equal to ab would be met using international monetary reserves.
• D)payment deficit will cause changes in domestic price and income levels, shifting demand to the left and supply to the right, and reestablishing the original exchange rate.

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