The Figure Given Below Depicts the Foreign Exchange Market for British

question 119

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 the British central bank is committed to maintaining an exchange rate of £1 = $1.50, but there is a permanent shift in supply from S₁ to S₃.According to the Bretton Woods agreement:

• A)the pound should be devalued.
• B)the dollar should be devalued.
• C)the British central bank should buy pounds in exchange for dollars.
• D)the British central bank should encourage speculation.
• E)the Fed should intervene to maintain the exchange rate of £1 = $1.

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Definitions:

Consumers' Desire

The inclination or preference of consumers towards certain products or services, which drives demand and influences market trends.

Product X

A placeholder name for any given product or service under consideration in an economic or marketing context.

Competitive Industry

A market scenario where there are many sellers, leading to competitive prices and innovations.

Economic Profits

The contrast between the sum of revenues and the sum of all costs, embracing both direct monetary and inferred expenditures.