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Author Question: Refer to Figure 19-10.Under the Bretton Woods System of exchange rates, if the par ... (Read 578 times)

a0266361136

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on: Mar 16, 2019

Question 1

Figure 19-8










Refer to Figure 19-8.  The equilibrium exchange rate is originally at A, $1.25/euro. Suppose the European Central Bank pegs its currency at $1.00/euro. Speculators expect that the value of the euro will rise and this shifts the demand curve for euro to D
2. If the European Central Bank abandons the peg, the equilibrium exchange rate would be


◦ $1.00/euro.
◦ $1.25/euro.
◦ $1.50/euro.
◦ $1.75/euro.

Question 2

Figure 19-10











Refer to Figure 19-10.  Under the Bretton Woods System of exchange rates, if the par exchange rate was $4 per pound in the figure above, then which of the following is true?


◦ The Bank of England would have to buy 0.7 million pounds per day with dollars.
◦ There is a shortage of pounds equal to 0.7 million.
◦ The Bank of England would have to sell 0.7 million pounds per day in exchange for dollars.
◦ The par exchange rate is below the equilibrium rate, causing a shortage of domestic currency.
Macroeconomics ¦ Hubbard, O'Brien ¦ 6th Edition
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Marked as best answer by a0266361136 on Mar 16, 2019

flannelavenger

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Reply #1 on: Mar 16, 2019
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a0266361136

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Reply 2 on: Mar 16, 2019
:D TYSM

ashely1112

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Reply 3 on: Yesterday
Wow, this really help

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