-In Exhibit FF-6, if the exchange rate of dollars per British pound is fixed at 1.70,
A) it would contribute to a U.S. trade deficit
B) U.S. exports would exceed imports
C) Great Britain would run a trade deficit
D) British imports would exceed their exports
E) the dollar price per British pound is too high

Question

-In Exhibit FF-6, if the exchange rate of dollars per British pound is fixed at 1.70,
A) it would contribute to a U.S. trade deficit 
B) U.S. exports would exceed imports 
C) Great Britain would run a trade deficit 
D) British imports would exceed their exports 
E) the dollar price per British pound is too high

Quizplus · Accepted Answer

If the exchange rate is fixed at 1.70 dollars per British pound and this rate is higher than the market equilibrium, it makes British goods relatively more expensive, leading to more imports into the U.S. and contributing to a U.S. trade deficit.

-In Exhibit FF-6, If the Exchange Rate of Dollars Per