If in a system of fixed exchange rates the dollar price of pounds is above the market equilibrium
A)gold will flow from Canada to Great Britain.
B)there will be a surplus of pounds.
C)the Canadian government will have to ration pounds to Canadian importers.
D)there will be a shortage of pounds.

Question

Quizplus · Accepted Answer

When the dollar price of pounds is above the market equilibrium, it means the pound is overvalued. This results in a surplus of pounds because the quantity supplied of pounds exceeds the quantity demanded at that price level.

If in a System of Fixed Exchange Rates the Dollar