Suppose that the Fed is fixing the dollar-pound exchange rate at $2.50 = £1. If the Fed's reserve of pounds falls by £500 million, by how much would the supply of dollars increase, all other things equal?
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Expert's answer
2020-04-30T09:46:07-0400
Due to the exchange rate as the Feds reserve of pounds falls by 500 million pounds, then the supply of dollars will increase by $1250 million. As per the given exchange rate and the prevailing conditions.
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Comments
My answer has to be in billions and not in millions
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