Consider the Supply-Demand Framework for the British Pound Relative to the U.S.dollar

question 5

Multiple Choice

Consider the supply-demand framework for the British pound relative to the U.S.dollar shown in the nearby chart.The exchange rate is currently $1.80 = £1.00.Which of the following is correct?

• A)At an exchange rate of $1.80 = £1.00, demand for British pounds exceeds supply.
• B)At an exchange rate of $1.80 = £1.00, supply for British pounds exceeds demand.
• C)Under a flexible exchange rate regime, the U.S.dollar will depreciate to an exchange rate of $1.90 = £1.00.
• D)a) and c) are correct

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