Under a Managed Float,if U

question 107

Multiple Choice

Under a managed float,if U.S.demand for British goods drops,which of the following actions would the Bank of England need to take in order to stop any movement in the dollar-pound exchange rate?

• A) Buy British pounds for dollars in order to shift the demand curve for pounds leftward
• B) Sell British pounds for dollars in order to shift the supply curve for pounds leftward
• C) Sell British pounds for dollars in order to shift the supply curve for pounds rightward
• D) Buy British pounds for dollars in order to shift the demand curve for pounds rightward
• E) Do nothing,since purchasing power parity will correct the situation in the short run.