The figure given below depicts the equilibrium in the foreign exchange market. Figure 13.1 Refer to Figure 13.1.If the exchange rate is fixed at E₂ but the free market equilibrium rate is E₁ then: A)there is a shortage of British pounds at E₁. B)no intervention is necessary to achieve the exchange rate E₁. C)there is a permanent surplus of U.S.dollars at E₁. D)there is a permanent surplus of U.S.dollars at E₂. E)there is a permanent shortage of U.S.dollars at E₃.

Question

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The Answer of The figure given below depicts the equilibrium in the foreign exchange market. Figure 13.1 Refer to Figure 13.1.If the exchange rate is fixed at E₂ but the free market equilibrium rate is E₁ then: A)there is a shortage of British pounds at E₁. B)no intervention is necessary to achieve the exchange rate E₁. C)there is a permanent surplus of U.S.dollars at E₁. D)there is a permanent surplus of U.S.dollars at E₂. E)there is a permanent shortage of U.S.dollars at E₃.

The Figure Given Below Depicts the Equilibrium in the Foreign