The diagram below shows the market for foreign exchange from the perspective of Canada. The demand for foreign exchange is D0 and the supply of foreign exchange varies between S2 and S1, with an average of S0.
FIGURE 34-4
-Refer to Figure 34-4. Suppose the Bank of Canada pegs the exchange rate at e0 and the supply curve is S1. The Bank would have to foreign exchange in the amount of per month.

Question

The diagram below shows the market for foreign exchange from the perspective of Canada. The demand for foreign exchange is D0 and the supply of foreign exchange varies between S2 and S1, with an average of S0.
  FIGURE 34-4
-Refer to Figure 34-4. Suppose the Bank of Canada pegs the exchange rate at e0 and the supply curve is S1. The Bank would have to foreign exchange in the amount of per month.

Quizplus · Accepted Answer

The Bank of Canada would have to purchase foreign exchange in the amount of Q0Q1 per month to maintain the exchange rate at e0.

The Diagram Below Shows the Market for Foreign Exchange from the Perspective