Refer to the diagram below.Assume the initial demand for and supply of dollars are shown by D₁ and S₁.The exchange rate will be: A) $1 equals 5 British pounds. B) $4 equals 1 British pound. C) $5 equals 1 British pound. D) JQ₃ British pounds per dollar.

Question

Quizplus · Accepted Answer

The equilibrium exchange rate occurs at the point where the demand for dollars (DS1U1B0) intersects with the supply of dollars (SS1U1B0), which is at a rate of $5 per 1 British pound. Therefore, the correct answer is C.

Refer to the Diagram Below