Figure 17-4
-In Figure 17-4, the equilibrium price of Dominican pesos is P_e. If the Dominican Republic government fixes the price of foreign currency in terms of domestic currency at P_f (below equilibrium) , what does the quantity Q_d through Q_s represent?

Question

Figure 17-4

-In Figure 17-4, the equilibrium price of Dominican pesos is P_e. If the Dominican Republic government fixes the price of foreign currency in terms of domestic currency at P_f (below equilibrium) , what does the quantity Q_d through Q_s represent?

Quizplus · Accepted Answer

When the government fixes the price of foreign currency below the equilibrium price, it results in a shortage of foreign exchange because the quantity demanded exceeds the quantity supplied at that price level.

Figure 17-4 -In Figure 17-4, the Equilibrium Price of Dominican Pesos Is