Use the Graph Below to Answer Questions 9 - 12

question 65

Multiple Choice

Use the graph below to answer questions 9 - 12.
Figure 1.1
-Refer to Figure 1.1.Suppose that the market for British pound is initially in equilibrium at point A with the exchange rate $2.00 per pound.Then the demand curve shifts to D₂.If the British central bank wants to fix the exchange rate at $2.00/pound,there will be ________ of pound and the pound is __________.

• A) excess supply; overvalued
• B) excess supply; undervalued
• C) excess demand; overvalued
• D) excess demand; undervalued

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Definitions:

Final Demand

The demand for finished products by consumers, businesses, and the government, without any further processing or transformation.

Goods and Services

Represents the output of an economy, where goods are physical items and services are activities provided by others for benefit or pleasure.

MRP

In economics, Marginal Revenue Product is the additional revenue generated by employing one more unit of a resource.

Market Wage Rate

The prevailing pay scale for work performed in a specific industry or occupation in a geographical area.