Figure 3-22

If we know that the exchange rate is $1.60 per pound then the exchange rate of pounds per dollar is

a. greater than 1.60 b. 0.80 c. 1.00 d. 0.625 e. 1.60

Refer to the diagram for the federal funds market. A $25 billion increase in reserves will change the interest rate to:

A.  3.0 percent.
B.  3.5 percent.
C.  4.0 percent.
D.  cannot be determined with the above information.