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The Following Diagram Shows the Foreign Exchange Market for Sterling

Question 21

Multiple Choice

The following diagram shows the foreign exchange market for sterling.
The following diagram shows the foreign exchange market for sterling.   If, being worried about the effect on exports and wishing to prevent the exchange rate from rising above $1.80, the Bank of England decides to intervene by using the reserves, which of the following would have the desired effect? A)  Buying pounds using reserves of an amount a- b B)  Selling dollars to a sterling value of a- b C)  Buying dollars into the reserves by selling pounds of an amount c- d D)  Selling dollars from the reserves of an amount c- d If, being worried about the effect on exports and wishing to prevent the exchange rate from rising above $1.80, the Bank of England decides to intervene by using the reserves, which of the following would have the desired effect?


A) Buying pounds using reserves of an amount a- b
B) Selling dollars to a sterling value of a- b
C) Buying dollars into the reserves by selling pounds of an amount c- d
D) Selling dollars from the reserves of an amount c- d

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