10. Determining the Exchange Rate Use these data to answer the following questions about the market for British pounds:

Quantity Quantity Pound Price Demanded Supplied

(in $) (of pounds) (of pounds)

$4.00 50 100 3.00 75 75 2.00 100 50

a. Draw the demand and supply curves for pounds, and determine the equilibrium exchange rate (dollars per pound).

b. Suppose that the supply of pounds doubles. Draw the new supply curve.

c. What is the new equilibrium exchange rate?

d. Has the dollar appreciated or depreciated?

e. What happens to U.S. imports of British goods?