If the U.S. interest rate falls at the same time there is an increase in British real GDP, which of the following would happen in the market for British pounds?
a. A rightward shift of the demand for pounds curve, a rightward shift of the supply of pounds curve, a larger number of pounds traded, and an indeterminate effect on the dollars per pound exchange rate.
b. A rightward shift of the demand for pounds curve, a rightward shift of the supply of pounds curve, a larger number of pounds traded, and an increase in the dollars per pound exchange rate.
c. A rightward shift of the demand for pounds curve, a rightward shift of the supply of pounds curve, a larger number of pounds traded, and a decrease in the dollars per pound exchange rate.
d. A leftward shift of the demand for pounds curve, a rightward shift of the supply of pounds curve, a larger number of pounds traded, and an indeterminate effect on the dollars per pound exchange rate.
e. Cannot be determined without additional information.
A
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If the money supply in the economy were at MS2, to engage in contractionary policy the Federal Reserve Bank would use open market operation to move money supply to:
A. MS1
B. MS3
C. MS4
D. it would stay at MS2