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Refer to Figure 36

Question 120

Multiple Choice

Refer to Figure 36.5 for the dollar-euro foreign exchange market with the market exchange rate at P<sub>1.</sub> The European Union (EU) and U.S.governments have agreed on a fixed exchange rate of P<sub>2.</sub> This situation A) Causes a balance-of-payments deficit for the EU. B) Calls for an expansionary fiscal policy in the EU. C) Causes an excess demand for euros. Refer to Figure 36.5 for the dollar-euro foreign exchange market with the market exchange rate at P1. The European Union (EU) and U.S.governments have agreed on a fixed exchange rate of P2. This situation


A) Causes a balance-of-payments deficit for the EU.
B) Calls for an expansionary fiscal policy in the EU.
C) Causes an excess demand for euros.

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