Question

If actions of the Nepalese government caused a shortage of domestic currency, then the government fixed exchange rate would be

Answer 1

D) below the market equilibrium and rupee per dollars will tend to rise.

Step-by-step explanation:

In the case when the nepalese government taken an action that result in shortage of the domestic currency so the government exchange rate i.e. fixed would be below the market equilibrium and the dollars per rupee would increase as if there is a shortage so the government fixed the currency i.e. below the equilibrium due to which the currency would become stronger

Hence, the correct option is d.