Figure 19-8
-Refer to Figure 19-8.The equilibrium exchange rate is at A,$1.25/euro.Suppose the European Central Bank pegs its currency at $1.00/euro.At the pegged exchange rate,

Question

Figure 19-8 
-Refer to Figure 19-8.The equilibrium exchange rate is at A,$1.25/euro.Suppose the European Central Bank pegs its currency at $1.00/euro.At the pegged exchange rate,

Quizplus · Accepted Answer

At the pegged exchange rate of $1.00/euro, the quantity of euros demanded is 1,000 million, while the quantity of euros supplied is only 700 million. This creates a shortage of euros equal to 500 million.

Figure 19-8 -Refer to Figure 19-8.The Equilibrium Exchange Rate Is at A,$1.25/euro.Suppose