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 the British central bank is committed to maintaining an exchange rate of £1 = $1.50, but there is a permanent shift in supply from S₁ to S₃. According to the Bretton Woods agreement:

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 the British central bank is committed to maintaining an exchange rate of £1 = $1.50, but there is a permanent shift in supply from S₁ to S₃. According to the Bretton Woods agreement:

Quizplus · Accepted Answer

The correct answer is A because the Bretton Woods agreement required countries to maintain fixed exchange rates and to intervene in the foreign exchange market to support those rates. In this case, the British central bank would need to devalue the pound to maintain the exchange rate of £1 = $1.50.

The Figure Given Below Depicts the Foreign Exchange Market for British