Multiple Choice
The demand for the Franconian franc in the foreign exchange market equals 11,000 - 25,000e and the supply of francs in the foreign exchange market equals 9,000 + 25,000 e, where e is the nominal exchange rate expressed in U.S. dollars per franc. If the franc is fixed at 0.15 U.S. dollars per franc, then the franc is ________ and Franconia has a balance-of-payments ________.
A) overvalued; surplus of 5,500 francs
B) undervalued; surplus of 5,500 dollars
C) overvalued; deficit of 5,500 francs
D) undervalued; deficit of 5,500 francs
Correct Answer:
Verified
Correct Answer:
Verified
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