Use the Graph Below to Answer Questions 9 - 12

question 14

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,they have to:

• A) buy pound and sell dollar by the amount of Q₃ - Q₁.
• B) sell pound and buy dollar by the amount of Q₃ - Q₁.
• C) sell only pound by the amount of Q₃ - Q₁ and leave dollar alone.
• D) buy only pound by the amount of Q₃ - Q₁ and leave dollar alone.

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