Suppose That the United States Fixes the Dollar-Pound Exchange Rate

question 141

Multiple Choice

Suppose that the United States fixes the dollar-pound exchange rate. In the process of maintaining the fixed exchange rate, if the U.S. central bank starts to realize reduced reserves of pounds, this suggests that

• A)the quantity supplied of pounds has exceeded the quantity demanded of pounds.
• B)the quantity demanded of pounds has exceeded the quantity supplied of pounds.
• C)the exchange rate will rise.
• D)the U.S. supply of dollars has increased.

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Definitions:

Indifference Curves

Graphical representations in microeconomic theory that illustrate different combinations of two goods between which a consumer is indifferent in preference.

Optimal Consumption

The point at which an individual's utility from consuming goods and services is maximized, given their budget constraints.

Loaves

Units of bread that have been baked in a specific shape or size, often rectangular and intended for slicing.

Pounds

A unit of weight commonly used in the British imperial and United States customary systems, equal to 16 ounces.