If the U.S. demand for British pounds increases,
A) the dollar price of a British pound will increase
B) the dollar price of a British pound will decrease
C) the exchange rate between dollars and pounds will be out of equilibrium
D) the pound will fall in value against the dollar
E) there will be no change in either the value of the dollar or the pound

Question

Quizplus · Accepted Answer

If the U.S. demand for British pounds increases, it means there are more U.S. dollars trying to buy British pounds, which creates an imbalance in the supply and demand for the British pound. As a result, the price of the British pound (in U.S. dollars) will increase to reach a new equilibrium point.

If the U.S. Demand for British Pounds Increases