Please dont copy paste from chegg please 2.4Supply for poundsDemand for pounds1.8Supply for pounds1.2The Imbalance0.0Demand for pounds1216QUANTITY OF POUNDS (Millions)An increase in the price level in the United States leads to an increase in imports from Great Britain. As a result, the demand for British poundscausing amillon imbalance in the U.S. balance of payments.decreasesd standard, how is the fixed exchange rate maintained in the face of the balance-of-payments imbalance shown on the previous graph?increasesmust flow from Great Britain to the United States.The IMF must lend dollars to Great Britain with which to buy pounds.The IMF must lend pounds to the United States with which to buy dollars.Gold must flow from the United States to Great Britain.PRICE OF A POUND (In Doairs 5. Gold standardBetween 1879 and 1914, the world's major nations adhered to the gold standard. Under the gold standard, a country maintained a fixed relationshipbetween its stock of gold and its money supply. Suppose that Great Britain defined a British pound as 120 grains of gold, and the United Statesdefined $1 as 100 grains of gold.Under the gold standard, a British pound would have been worthU.S. dollars.Suppose the fixed exchange rate is $1.20 per pound. Suppose the0.50ease in the price level in the United kitates leads to an increase in importsfrom Great Britain.0.80$1.20On the following graph, shift the relevant curve or curves to illustdescribed changes. Then use the black points (cross symbol) to indicate the0.60imbalance.24Supply for poundsDemand for poundsSupply for pounds12The Imbalance06Demand for poundsPRICE OF A POUND (In Dollars)

Price , interest rate and many more factors affect the exchange rate and lead to appreciation and…

24 Supply for pounds Demand for pounds 18 Supply for pounds The Imbalance 0.6 Demand for pounds 12 QUANTITY OF POUNDS (Millions) An increase in the price level in the United States leads to an increase in imports from Great Britain. As a result, the demand for British pounds causing a million imbalance in the U.S. balance of payments. decreases d standard, how is the fixed exchange rate maintained in the face of the balance-of-payments imbalance shown on the previous graph? increases I must flow from Great Britain to the United States. The IMF must lend dollars to Great Britain with which to buy pounds. The IMF must lend pounds to the United States with which to buy dollars. Gold must fiow from the United States to Great Britain. 12