Table 15.1.
The Market for Francs

-Refer to Table 15.1.If monetary authorities fix the exchange rate at $0.10 per franc,there would be a:
A) Shortage of 200 francs
B) Shortage of 400 francs
C) Surplus of 200 francs
D) Surplus of 400 francs

Question

Table 15.1.
The Market for Francs
 
-Refer to Table 15.1.If monetary authorities fix the exchange rate at $0.10 per franc,there would be a:
A) Shortage of 200 francs 
B) Shortage of 400 francs 
C) Surplus of 200 francs 
D) Surplus of 400 francs

Quizplus · Accepted Answer

When the exchange rate is fixed at $0.10 per franc, the quantity of francs demanded exceeds the quantity supplied. Therefore, there is a shortage of francs in the market. The magnitude of the shortage is equal to the difference between the quantity demanded (700 francs) and the quantity supplied (300 francs), which is 400 francs.

Table 15.1. The Market for Francs