Post by: bclement10 on Mar 16, 2019
Question 1
Figure 19-4
Refer to Figure 19-4. The equilibrium exchange rate is originally at A, $3/pound. Suppose the British government pegs its currency at $4/pound. Speculators expect that the value of the pound will drop and this shifts the demand curve for pounds to D
2. If the government abandons the peg, the equilibrium exchange rate would be
◦ $4/pound.
◦ $3/pound.
◦ $2/pound.
◦ less than $2/pound.
Question 2
Figure 19-5
Refer to Figure 19-5. The Chinese government pegs the yuan to the dollar, at one of the specified exchange rates on the graph, such that it undervalues its currency. Using the figure above, this would generate
◦ a shortage of yuan equal to 400 million.
◦ a shortage of yuan equal to 200 million.
◦ a surplus of yuan equal to 200 million.
◦ a surplus of yuan equal to 400 million.
◦ a surplus of yuan equal to 300 million.
Post by: chjcharjto14 on Mar 16, 2019
Answer 1
$2/pound.Answer 2
a shortage of yuan equal to 400 million.