Macroeconomics 6th Edition by Robert Hall,Marc Lieberman

Exercise 2

Let the monthly demand for British pounds and the monthly supply of British pounds be described by the following equations:
Demand for pounds =10 - 2 e
Supply of pounds = 4 + 3 e
where the quantities are in millions of pounds, and e is dollars per pound.
a. Find the equilibrium exchange rate.
b. Suppose the U.S. government intervenes in the foreign currency market and uses U.S. dollars to buy 2 million pounds each month. What happens to the exchange rate? Why might the U.S. government do this?