The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.
Figure 21.2

-Refer to Figure 21.2. Suppose that the British central bank wishes to maintain a fixed exchange rate of £1 = $1.60. If supply decreases from S1 to S2, the bank must:
A) buy 25 pounds to shift the supply curve from S2 to S1.
B) buy 50 pounds to shift the supply curve from S2 to S1.
C) sell 75 pounds to shift the supply curve from S2 to S1.
D) buy 75 pounds to shift the supply curve from S2 to S1.
E) sell 10 pounds to shift the supply curve from S2 to S1.

Question

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.
Figure 21.2
 
-Refer to Figure 21.2. Suppose that the British central bank wishes to maintain a fixed exchange rate of £1 = $1.60. If supply decreases from S1 to S2, the bank must:
A) buy 25 pounds to shift the supply curve from S2 to S1. 
B) buy 50 pounds to shift the supply curve from S2 to S1. 
C) sell 75 pounds to shift the supply curve from S2 to S1. 
D) buy 75 pounds to shift the supply curve from S2 to S1. 
E) sell 10 pounds to shift the supply curve from S2 to S1.

Quizplus · Accepted Answer

The Answer of The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.
Figure 21.2
 
-Refer to Figure 21.2. Suppose that the British central bank wishes to maintain a fixed exchange rate of £1 = $1.60. If supply decreases from S1 to S2, the bank must:
A) buy 25 pounds to shift the supply curve from S2 to S1. 
B) buy 50 pounds to shift the supply curve from S2 to S1. 
C) sell 75 pounds to shift the supply curve from S2 to S1. 
D) buy 75 pounds to shift the supply curve from S2 to S1. 
E) sell 10 pounds to shift the supply curve from S2 to S1.

The Figure Given Below Depicts the Foreign Exchange Market for British