The figure given below depicts the equilibrium exchange rate between the U.S dollar and the Mexican peso.?Figure 13.2

-Refer to Figure 13.2. Given a target exchange rate of MXP 11 = $1 with S₁ the relevant supply curve and a decline in Mexican demand for U.S. dollars from D₁ to D₂ the Fed intervenes in the foreign exchange market by:
A) selling Q₃ amount of pesos.
B) selling Q₃ amount of U.S. dollars.
C) buying (Q₂ - Q₁) amount of pesos.
D) buying (Q₁ - Q₃) amount of U.S. dollars.
E) buying (Q₂ - Q₃) amount of U.S dollars.

Question

The figure given below depicts the equilibrium exchange rate between the U.S dollar and the Mexican peso.?Figure 13.2
 
-Refer to Figure 13.2. Given a target exchange rate of MXP 11 = $1 with S₁ the relevant supply curve and a decline in Mexican demand for U.S. dollars from D₁ to D₂ the Fed intervenes in the foreign exchange market by:
A) selling Q₃ amount of pesos. 
B) selling Q₃ amount of U.S. dollars. 
C) buying (Q₂ - Q₁) amount of pesos. 
D) buying (Q₁ - Q₃) amount of U.S. dollars. 
E) buying (Q₂ - Q₃) amount of U.S dollars.

Quizplus · Accepted Answer

The Answer of The figure given below depicts the equilibrium exchange rate between the U.S dollar and the Mexican peso.?Figure 13.2
 
-Refer to Figure 13.2. Given a target exchange rate of MXP 11 = $1 with S₁ the relevant supply curve and a decline in Mexican demand for U.S. dollars from D₁ to D₂ the Fed intervenes in the foreign exchange market by:
A) selling Q₃ amount of pesos. 
B) selling Q₃ amount of U.S. dollars. 
C) buying (Q₂ - Q₁) amount of pesos. 
D) buying (Q₁ - Q₃) amount of U.S. dollars. 
E) buying (Q₂ - Q₃) amount of U.S dollars.

The Figure Given Below Depicts the Equilibrium Exchange Rate Between