Refer to the Graph Above, Which Shows a Change in the Demand

question 123

Multiple Choice

Refer to the graph above, which shows a change in the demand for pounds from D to D'. Under a system of fixed exchange rates, the:

• A) Price of a pound will increase to $3
• B) Price of a dollar will increase to 3 pounds
• C) Shortage equal to ab would be met using international monetary reserves
• D) Payment deficit will cause changes in price and income levels, which reestablishes the original exchange rate

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