Figure 15.2 Market for the British Pound

Multiple Choice

Figure 15.2
Market for the British Pound

-Refer to Figure 15.2.Suppose the demand for pounds increases from D0 to D1.Under a fixed exchange rate system,the U.S.exchange stabilization fund could maintain a fixed exchange rate of $0.80 per pound by:

A) Selling pounds for dollars on the foreign exchange market
B) Selling dollars for pounds on the foreign exchange market
C) Decreasing U.S.exports,thus decreasing the supply of pounds
D) Stimulating U.S.imports,thus increasing the demand for pounds