Refer to the diagram below.Assume the initial demand for and supply of dollars are shown by D₁ and S₁.The exchange rate will be: A)$1 equals 5 British pounds. B)$4 equals 1 British pound. C)$5 equals 1 British pound. D)JQ₃ British pounds per dollar.

Question

Quizplus · Accepted Answer

The equilibrium exchange rate is where the demand for dollars equals the supply of dollars. In this diagram, it occurs at a rate of 1 dollar to 5 British pounds, which is represented by the intersection of the demand curve (DS1U1B0) and the supply curve (SS1U1B0), labeled as E in the diagram. Therefore, the correct answer is C, which states that 5 British pounds equal 1 dollar.

Refer to the Diagram Below