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The Figure Given Below Depicts the Equilibrium in the Foreign

Question 135

Multiple Choice

The figure given below depicts the equilibrium in the foreign exchange market.
Figure 13.1
The figure given below depicts the equilibrium in the foreign exchange market. Figure 13.1 -Refer to Figure 13.1. If the current equilibrium exchange rate is E<sub>1</sub> what action would the Fed have to take to achieve a target exchange rate of E<sub>2</sub>? A) Sell (Q<sub>2</sub> - Q<sub>1</sub>) amount of U.S. dollars. B) Buy (Q<sub>1</sub> - Q<sub>3</sub>) amount of U.S. dollars. C) Buy (Q<sub>2</sub> - Q<sub>3</sub>) amount of U.S. dollars. D) Buy (Q<sub>2</sub> - Q<sub>1</sub>) amount of U.S. dollars. E) Sell (Q<sub>1</sub> - Q<sub>3</sub>) amount of U.S. dollars.
-Refer to Figure 13.1. If the current equilibrium exchange rate is E1 what action would the Fed have to take to achieve a target exchange rate of E2?


A) Sell (Q2 - Q1) amount of U.S. dollars.
B) Buy (Q1 - Q3) amount of U.S. dollars.
C) Buy (Q2 - Q3) amount of U.S. dollars.
D) Buy (Q2 - Q1) amount of U.S. dollars.
E) Sell (Q1 - Q3) amount of U.S. dollars.

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