The Figure Given Below Illustrates the Market for British Pounds

Multiple Choice

The figure given below illustrates the market for British pounds. D_£ and S_£ are the demand and supply curves of the British pounds respectively. If the exchange rate is pegged at $2.50 per pound::

A) the pound will be overvalued.
B) the pound will be undervalued.
C) the British goods will become cheap in U.S.markets.
D) the demand for the American goods will fall in British markets.