Attempts Average: /11 6. Fixed exchange rates Aa Aa Consider the exchange rate b

Question

Attempts Average: /11 6. Fixed exchange rates Aa Aa Consider the exchange rate between the Malaysian ringgit and the euro. Suppose the Malaysian government and the euro zone governments agree to fix the exchange rate at 6 ringgit per euro. Refer to the following graph when answering the questions that follow EXCHANGE RATE (Ringgit per eurol 12.00 10.00 Supply o Euros 8.00 6.00 Official Value 4.00 2.00 Demand for Euros 0.00 10 FOREIGN EXCHANGE (Billions of euros At the official exchange rate, the euro is means that Malaysians pay , and the Malaysian ringgit is which for European exports than they would with a free-floating exchange rate

Explanation / Answer

1. Expensive/high ,

2 cheaper/low

3. pay More

4. Supply of Euro

5. Demand of Euro

6. the european central bank uses its riggit reeserve to purchase euro in the foreign exchange market

   the malaysian central bank uses its riggit reeserve to purchase euro in the foreign exchange market

7. depreciation

8. appreciation

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