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$/L

EXCESS DEMAND FOR L UK BOP +$50. BRITISH GOVERNMENT SELLS 50 L (BUYS $ FOR OFFICIAL RESERVES). EXCESS SUPPLY OF L 20 UK BOP -$20. BRITISH GOVERNMENT BUYS L 20 (SELLS $ FROM OFFICIAL RESERVES). $3.00/L. Upper L Limit. Lower L Limit. $2.60/L. D’. 10. 30. 70. 120.

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$/L

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  1. EXCESS DEMAND FOR L UK BOP +$50 BRITISH GOVERNMENT SELLS 50 L (BUYS $ FOR OFFICIAL RESERVES) EXCESS SUPPLY OF L 20 UK BOP -$20 BRITISH GOVERNMENT BUYS L 20 (SELLS $ FROM OFFICIAL RESERVES) $3.00/L Upper L Limit Lower L Limit $2.60/L D’ 10 30 70 120 The diagram below shows the demand for and supply of L in the British foreign exchange market $/L S $2.80/L D Q 50 QUANTITY OF L Trade and welfare

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