Refer to Figure 19-4.The equilibrium exchange rate is atA, ...

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Question 1

Figure 19-3










Refer to Figure 19-3.  If the Thai government pegs its currency to the dollar at a value above $.03/baht, we would say the currency is

◦ undervalued.
◦ overvalued.
◦ parity valued.
◦ equilibrium valued.

Question 2

Figure 19-4










Refer to Figure 19-4.  The equilibrium exchange rate is at A, $3/pound. Suppose the British government pegs its currency at $4/pound. At the pegged exchange rate,

◦ there is a shortage of pounds equal to 600 million.
◦ there is a surplus of pounds equal to 400 million.
◦ there is a shortage of pounds equal to 400 million.
◦ there is a surplus of pounds equal to 600 million.
◦ there is a shortage of pounds equal to 200 million.

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