Use the Figure Below to Answer the Following Question(s)

question 29

Multiple Choice

Use the figure below to answer the following question(s) .
Figure 18-1
-Figure 18-1 illustrates supply and demand for U.S. dollars and British pounds in the foreign exchange market. If the dollar price of pounds is $1.80, which of the following is true?

• A)There is an excess supply of pounds, and the dollar price of pounds will rise.
• B)There is an excess demand for pounds, and the dollar price of pounds will rise.
• C)There is an excess supply of pounds, and the dollar price of pounds will fall.
• D)There is an excess demand for pounds, and the dollar price of pounds will fall.

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Definitions:

Adverse Selection

A situation in which sellers have information that buyers do not, leading to transactions that favor the seller.

Insurance

A monetary service that offers coverage against possible future harms or losses in return for a premium payment.

Adverse Selection

Adverse selection is a situation in financial markets where there is asymmetric information leading buyers or sellers to make decisions that can result in the market becoming skewed or unbalanced, often seen in insurance markets.

Insurance

A contract represented by a policy, where an individual or entity receives financial protection or reimbursement against losses from an insurance company.