Refer to Figure 19-4. The equilibrium exchange rate is originally at A, $3/pound. Suppose the British government pegs its currency at $4/pound

Speculators expect that the value of the pound will drop and this shifts the demand curve for pounds to D2. If the government abandons the peg, the equilibrium exchange rate would be
A) $4/pound. B) $3/pound.
C) $2/pound. D) less than $2/pound.


C

Economics

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