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Consider the Supply-Demand Framework for the British Pound Relative to the U.S.dollar

Question 100

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Consider the supply-demand framework for the British pound relative to the U.S.dollar shown in the following chart.The exchange rate is currently $1.80 = £1.00.Which of the following is correct? Consider the supply-demand framework for the British pound relative to the U.S.dollar shown in the following chart.The exchange rate is currently $1.80 = £1.00.Which of the following is correct?   A) To  fix  the exchange rate at $1.80 = £1.00,the Federal Reserve could use contractionary monetary policy to shift the demand curve to the left. B) To  fix  the exchange rate at $1.80 = £1.00,the U.S.government could use contractionary fiscal policy to shift the demand curve to the left. C) The British Government could use fiscal or monetary policy to shift the supply curve to the right to fix the exchange rate to $1.80 = £1.00. D) all of the options


A) To "fix" the exchange rate at $1.80 = £1.00,the Federal Reserve could use contractionary monetary policy to shift the demand curve to the left.
B) To "fix" the exchange rate at $1.80 = £1.00,the U.S.government could use contractionary fiscal policy to shift the demand curve to the left.
C) The British Government could use fiscal or monetary policy to shift the supply curve to the right to fix the exchange rate to $1.80 = £1.00.
D) all of the options

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