Assume that the fixed exchange rate system of 1.1 euros = 1 dollar is
Assume that the fixed exchange rate system of 1.1 euros = 1 dollar is below the equilibrium exchange rate of 1.3 euros = 1 dollar in a flexible exchange rate system. Then, at the fixed exchange rate, the dollar would be
a. undervalued and the euro would be overvalued.
b. overvalued and the euro would be undervalued.
c. revalued and the euro would be devalued.
d. depreciated and the euro would be appreciated.
ANSWER
A
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