Under a fixed exchange rate system,if the dollar price of Mexican pesos is above its equilibrium level,the peso is referred to as overvalued and the dollar is necessarily undervalued.

Question

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According to the definition of overvalued and undervalued currencies, if the dollar price of Mexican pesos is above its equilibrium level, the peso is overvalued, meaning it is more expensive than it should be relative to the dollar. In contrast, the dollar is undervalued, meaning it is cheaper than it should be relative to the peso. This is because a fixed exchange rate system requires the central bank to intervene in the foreign exchange market to maintain the exchange rate at the fixed level, which can result in a currency becoming overvalued or undervalued.

Under a Fixed Exchange Rate System,if the Dollar Price of Mexican