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

question 79

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)To "fix" the exchange rate at $1.80 = £1.00, the Federal Reserve could use contractionary monetary policy to shift the demand curve to the left.
• B)To "fix" the exchange rate at $1.80 = £1.00, the U.S.government could use contractionary fiscal policy to shift the demand curve to the left.
• C)The British Government could use fiscal or monetary policy to shift the supply curve to the right to fix the exchange rate to $1.80 = £1.00.
• D)All of the above.

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Definitions:

Return On Investment

Return on investment (ROI) is a financial metric used to evaluate the efficiency of an investment, calculated as the net profit divided by the cost of the investment.

ROI

Return on Investment is a performance measure used to evaluate the efficiency or profitability of an investment relative to its cost.

Residual Income

The amount of income that an entity has after all personal debts and expenses, including a mortgage, have been paid.

Residual Income

A measure of profitability that calculates the net income an investment or division generates above a specified minimum return.