The Figure Given Below Depicts the Foreign Exchange Market for British

question 42

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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