Figure 15-2 -Refer to Figure 15-2.Suppose the Exchange Rate Between the Dollar

Figure 15-2

-Refer to Figure 15-2.Suppose the exchange rate between the dollar and the British pound Is fixed at £0.3 per dollar.Now suppose U.S.residents choose to purchase more British goods and services.Further, suppose that following this event, the Fed intervenes to keep the
Exchange rate at £0.3 per dollar.To do so, the Fed is forced to pursue

A) an expansionary monetary policy in which it will increase its reserves of dollars.
B) a contractionary monetary policy in which it will draw down its reserves of pounds.
C) an expansionary monetary policy in which it will increase its reserves of pounds.
D) a contractionary monetary policy in which it will draw down its reserves of dollars,