Figure 19-11
-Refer to Figure 19-11.The graph above depicts supply and demand for British pounds during a trading day.At a fixed exchange rate of $2.00 per pound,the pound is ________ versus the dollar.A ________ of the pound would correct the fundamental disequilibrium that exists in this market.

Question

Figure 19-11 
-Refer to Figure 19-11.The graph above depicts supply and demand for British pounds during a trading day.At a fixed exchange rate of $2.00 per pound,the pound is ________ versus the dollar.A ________ of the pound would correct the fundamental disequilibrium that exists in this market.

Quizplus · Accepted Answer

The pound is overvalued because the quantity supplied is greater than the quantity demanded at the fixed exchange rate of $2.00 per pound. A devaluation of the pound would make it cheaper for foreigners to buy British goods and services, which would increase the demand for pounds and correct the fundamental disequilibrium.

Figure 19-11 -Refer to Figure 19-11.The Graph Above Depicts Supply and Demand