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Figure 2.3: The Market for British Pounds S (£) D2(£) *D(£) D3(L) Q3 Quantities of pound…
Figure 2.3: The Market for British Pounds S (£) D2(£) *D(£) D3(L) Q3 Quantities of pound Q5 Qu Q1 Q2 Refer to Figure 2.3. Suppose that the spot exchange rate of British pound is $2.00 per pound. Suppose that the U.S. decreases its taste for imports from the U.K. Under a flexible exchange rate system, the Bank of England will: Let the British pound depreciate Let the British pound appreciate Sell pounds and buy dollars in foreign exchange market Sell dollars and buy pounds in foreign exchange market
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