-Referring to Figure 2

question 10

Multiple Choice

-Referring to Figure 2.2,an increase in the demand for British goods by the U.S.importers has led to pressure on the pound to appreciate against the dollar.If the Bank of England wishes to intervene to maintain a peg of $2.0/pound,what distance represents that intervention?

• A) A to B
• B) B to A
• C) A to C
• D) B to C

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Definitions:

Absolute Purchasing Power Parity

The economic theory that the price of a good should be the same in different countries when expressed in a common currency, accounting for exchange rates.

Trade Barriers

Measures implemented by a country to restrict or regulate international trade, including tariffs, quotas, and import bans.

Absolute Purchasing Power Parity

It's a theory that suggests the exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two countries.

Economic Values

The measure of the benefit provided by a good or service to an economic agent.