Use the graph below to answer questions 17- 20.
Figure 1.2
-Refer to Figure 1.2.Suppose that the market for euro is initially in equilibrium at point A with the exchange rate $2.00 per euro.Then the supply curve shifts to S₂.If the European central bank wants to fix the exchange rate at $2.00/euro,there will be ________ of euro and the euro is __________.

Question

Use the graph below to answer questions 17- 20.
Figure 1.2

-Refer to Figure 1.2.Suppose that the market for euro is initially in equilibrium at point A with the exchange rate $2.00 per euro.Then the supply curve shifts to S₂.If the European central bank wants to fix the exchange rate at $2.00/euro,there will be ________ of euro and the euro is __________.

Quizplus · Accepted Answer

When the supply curve shifts to S2, there is an excess supply of euros at the fixed exchange rate of $2.00/euro, making the euro overvalued compared to the new equilibrium rate.

Use the Graph Below to Answer Questions 17- 20