The Figure Given Below Depicts the Equilibrium in the Foreign

question 31

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:

Liability Accounts

Accounts on a balance sheet that represent obligations or debts that a company owes to others, which must be settled over time through the transfer of economic benefits including money, goods, or services.

Stockholders' Equity Accounts

These accounts represent the owners' residual interest in the corporation's assets after deducting liabilities.

Credit Balances

Accounts within the accounting ledger that have a positive balance, indicating amounts owed to others.

Trial Balance

A list of all accounts with their balances to provide a check on the equality of the debits and credits.