Figure 30-4 -Refer to Figure 30-4.The Equilibrium Exchange Rate Is at A,$3/pound.Suppose

question 194

Multiple Choice

Figure 30-4
-Refer to Figure 30-4.The equilibrium exchange rate is at A,$3/pound.Suppose the British government pegs its currency at $4/pound.Speculators expect that the value of the pound will drop and this shifts the demand curve for pounds to D2.After the shift

• A)there is a shortage of pounds equal to 600 million.
• B)there is a surplus of pounds equal to 400 million.
• C)there is a shortage of pounds equal to 400 million.
• D)there is a surplus of pounds equal to 600 million.
• E)there is a shortage of pounds equal to 200 million.

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Definitions:

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