If the equilibrium exchange rate is 15 pesos per dollar and the central bank fixes the exchange rateat 17 pesos per dollar then we can conclude that the peso is
A)appreciated.
B)depreciated.
C)overvalued.
D)undervalued.

Question

Quizplus · Accepted Answer

The peso is undervalued because the fixed exchange rate (17 pesos per dollar) is higher than the equilibrium exchange rate (15 pesos per dollar), indicating that the peso is worth less in the fixed rate than it would be in a free market.

If the Equilibrium Exchange Rate Is 15 Pesos Per Dollar