Assume that the fixed exchange rate system of 100 pesos = 1 dollar is
Assume that the fixed exchange rate system of 100 pesos = 1 dollar is above the equilibrium exchange rate of 90 pesos= 1 dollar in a flexible exchange rate system. Then the dollar would be
a. undervalued and the peso would be overvalued.
b. overvalued and the peso would be undervalued.
c. revalued.
d. depreciated and the peso would be appreciated.
ANSWER
B
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