Figure 19-8
-Refer to Figure 19-8.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 19-8 
-Refer to Figure 19-8.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 would increase to 2.2 billion, while the quantity of euros supplied would decrease to 1.7 billion. Therefore, there is a shortage of euros equal to 500 million (2.2 billion - 1.7 billion = 500 million).

Figure 19-8 -Refer to Figure 19-8.The Equilibrium Exchange Rate Is at A,$1.25/euro.Suppose