Refer to Figure 19-8. The equilibrium exchange rate is at A, $1.25/euro. Suppose the European Central Bank pegs its currency at $1.00/euro. At the pegged exchange rate,

A) there is a surplus of euros equal to 700 million. B) there is a shortage of euros equal to 500 million.
C) there is a shortage of euros equal to 200 million. D) there is a surplus of euros equal to 300 million.


B

Economics

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