The Figure Given Below Depicts the Foreign Exchange Market for British

question 72

Multiple Choice

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.?Figure 21.2

-Refer to Figure 21.2. Suppose that the British central bank wishes to maintain a fixed exchange rate of £1 = $1.60. If supply decreases from S₁ to S₂, the bank must:

• A) buy 25 pounds to shift the supply curve from S₂ to S₁.
• B) buy 50 pounds to shift the supply curve from S₂ to S₁.
• C) sell 75 pounds to shift the supply curve from S₂ to S₁.
• D) buy 75 pounds to shift the supply curve from S₂ to S₁.
• E) sell 10 pounds to shift the supply curve from S₂ to S₁.

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Definitions:

Bank Reconciliation

The process of matching and comparing figures from accounting records against those presented on a bank statement.

Cash Sales

Transactions in which a customer pays for goods or services at the point of sale with cash, resulting in immediate revenue for the seller.

Cash Receipts Journal

The special journal in which all cash receipts are recorded.

Compensating Balance

A minimum account balance that a company must maintain as part of an agreement with a lender, often to secure a loan or line of credit.