Figure 19-4 -Refer to Figure 19-4.The Equilibrium Exchange Rate Is Originally at Is

question 249

Multiple Choice

Figure 19-4
-Refer to Figure 19-4.The equilibrium exchange rate is originally 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.If the government abandons the peg,the equilibrium exchange rate would be

• A)$4/pound.
• B)$3/pound.
• C)$2/pound.
• D)less than $2/pound.

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