Figure 15.9 Alt text for Figure 15.9: In figure 15.9, a graph illustrates the quantity of euros traded against the exchange rate.
Long description for Figure 15.9: The x-axis is labelled, quantity of euros traded in millions per day.The y-axis is labelled, exchange rate, Canadian dollar against the euro.A straight line supply curve, S, slopes up from the bottom left corner to the top right corner.2 straight line demand curves, D1 and D2, slope down from the top left corner to the bottom right corner.Curve D2 is plotted to the right of curve D1.The difference between the curves is indicated by a right pointing arrow.Curve S intersects curves D1 and D2 at points A (500, 1.25)and B (700, 1.50).Point (200, 1.00)is plotted near the bottom of curve S.Point (950, 1.75)is plotted near the top of curve S.Point (500, 1.75)is plotted near the top of curve D2.Points (900, 1.25)and point (1,000, 1.00)are plotted near the bottom of curve D2.Point (200,1.75)is plotted near the top of curve D1.Point (700, 1.00)is plotted near the bottom of curve D1.All points are connected to their corresponding values on the x and y-axes with dotted lines.
-Refer to Figure 15.9.The equilibrium exchange rate is at A, $1.25/euro.Suppose the European Central Bank pegs its currency at $1.00/euro.At the pegged exchange rate,

Question

Figure 15.9  Alt text for Figure 15.9: In figure 15.9, a graph illustrates the quantity of euros traded against the exchange rate.
Long description for Figure 15.9: The x-axis is labelled, quantity of euros traded in millions per day.The y-axis is labelled, exchange rate, Canadian dollar against the euro.A straight line supply curve, S, slopes up from the bottom left corner to the top right corner.2 straight line demand curves, D1 and D2, slope down from the top left corner to the bottom right corner.Curve D2 is plotted to the right of curve D1.The difference between the curves is indicated by a right pointing arrow.Curve S intersects curves D1 and D2 at points A (500, 1.25)and B (700, 1.50).Point (200, 1.00)is plotted near the bottom of curve S.Point (950, 1.75)is plotted near the top of curve S.Point (500, 1.75)is plotted near the top of curve D2.Points (900, 1.25)and point (1,000, 1.00)are plotted near the bottom of curve D2.Point (200,1.75)is plotted near the top of curve D1.Point (700, 1.00)is plotted near the bottom of curve D1.All points are connected to their corresponding values on the x and y-axes with dotted lines.
-Refer to Figure 15.9.The equilibrium exchange rate is at A, $1.25/euro.Suppose the European Central Bank pegs its currency at $1.00/euro.At the pegged exchange rate,

Quizplus · Accepted Answer

At the pegged exchange rate of $1.00/euro, the quantity of euros demanded is 900 million, while the quantity of euros supplied is only 200 million. This creates a shortage of euros equal to 500 million.

Figure 159 Alt Text for Figure 15