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 0.25 U.S. dollars per franc, then the franc is ________ and Franconia has a balance-of-payments ________.
A. overvalued; surplus of 10,500 francs
B. undervalued; surplus of 10,500 dollars
C. undervalued; deficit of 10,500 francs
D. overvalued; deficit of 10,500 francs
Answer: D
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