The Figure Given Below Depicts the Equilibrium in the Foreign

question 12

Multiple Choice

The figure given below depicts the equilibrium in the foreign exchange market. Figure 13.1 Refer to Figure 13.1.If the exchange rate is fixed at E₂ but the free market equilibrium rate is E₁ then:

• A)there is a shortage of British pounds at E₁.
• B)no intervention is necessary to achieve the exchange rate E₁.
• C)there is a permanent surplus of U.S.dollars at E₁.
• D)there is a permanent surplus of U.S.dollars at E₂.
• E)there is a permanent shortage of U.S.dollars at E₃.

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