The demand for the Franconian franc in the foreign exchange market equals 14,000 - 3,000e and the supply of francs in the foreign exchange market equals 2,000 + 2,000e, where e is the nominal exchange rate expressed in U.S. dollars per franc. If the franc is fixed at 2 U.S. dollars per franc, then to maintain this fixed rate Franconia's international reserves must:
A. decrease by 4,000 dollars per period.
B. decrease by 2,000 dollars per period.
C. increase by 4,000 dollars per period.
D. increase by 2,000 dollars per period.
Answer: C
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