Essay
Suppose that the current equilibrium exchange rate between the United States (US)dollar and Philippine peso is $0.20 per peso. The Philippine government pegged the peso to the US dollar at the rate of $0.25 per peso. Draw the market demand and supply curve of pesos for US dollars. Would the Philippine central bank have to buy or sell pesos to maintain the peg? Show on the diagram how many pesos would be bought and sold.
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The equilibrium exchange rate is shown b...View Answer
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