The Figure Given Below Depicts the Foreign Exchange Market for British

question 97

Multiple Choice

The figure given below depicts the foreign exchange market for British pounds traded for U.S.dollars. Figure 22.2
- Refer to Figure 22.2.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:

Liquidation

The process of closing a business and distributing its assets to claimants, often involving selling off assets to pay off creditors and then returning any remaining assets to the shareholders.

Redeem

To recover ownership of something by paying off a debt or fulfilling an obligation.

Residual Assets

The remaining assets that belong to shareholders after a company has paid all its debts and obligations.

Dissolution

The act of dissolving or ending an entity, such as the termination of a corporation or partnership.