Multiple Choice
The demand for euros in the foreign exchange market equals 8,000 - 2,000 e and the supply of euros in the foreign exchange market equals 3,000 + 3,000 e, where e is the nominal exchange rate expressed in U.S. dollars per euro. If the euro is fixed at 0.85 U.S. dollars per euro, then the euro is ________ and Euroland has a balance-of-payments ________.
A) overvalued; surplus of 750 euros
B) overvalued; deficit of 750 euros
C) undervalued; deficit of 750 euros
D) undervalued; surplus of 750 euros
Correct Answer:

Verified
Correct Answer:
Verified
Q101: In an open economy with flexible exchange
Q102: The demand for euros in the foreign
Q103: When a currency is overvalued, international reserves
Q104: A fixed exchange rate is an exchange
Q105: In an open economy with flexible exchange
Q107: An undervalued exchange rate is an exchange
Q108: Suppose the price of gold is initially
Q109: The gold standard is an example of
Q110: Suppose the government of New Country has
Q111: If the nominal exchange rate were to