Referring to Figure 17.1, if the British government wants to peg the exchange rate of the pound at $2.50 per pound, what action would British monetary authorities have to undertake?
A. Sell 1 million pounds and buy 2.5 million dollars.
B. Buy 1 million pounds and sell 1 million dollars.
C. Buy 1 million pounds and sell 2.5 million dollars.
D. Buy 5.5 million pounds and sell 11 million dollars.
Answer:C
Referring to Figure 17.1, if the British government wants to peg the exchange rate of the pound at $2.50 per pound, what action would British monetary authorities have to undertake?
A. Sell 1 million pounds and buy 2.5 million dollars. B. Buy 1 million pounds and sell 1 million dollars. C. Buy 1 million pounds and sell 2.5 million dollars. D. Buy 5.5 million pounds and sell 11 million dollars.