Figure 19-3

-Of the graphs in Figure 19-3, where the dotted line shows the actual exchange rate, which one shows a country with an overvalued currency and a balance of trade deficit?

Question

Figure 19-3
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-Of the graphs in Figure 19-3, where the dotted line shows the actual exchange rate, which one shows a country with an overvalued currency and a balance of trade deficit?

Quizplus · Accepted Answer

The graph shows that the actual exchange rate is below the equilibrium exchange rate, which means that the currency is overvalued. The balance of trade is negative, which means that the country is importing more than it is exporting.

Figure 19-3 ​

Figure 19-3