1.) Happy Land is operating a fixed exchange rate against the dollar at 3.5 dollars per...

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1.) Happy Land is operating a fixed exchange rate against the dollar at 3.5 dollars per happy pound. Exchange Rate Quantity Demanded (dollars per happy pound) (billion happy pounds per day) 2.75 3.0 3.25 3.5 3.75 4.0 4.25 90 80 70 60 50 40 30 Quantity Supplied (billion happy pounds per day) 10 20 30 40 50 60 70 a.) Draw the supply and demand balance of the foreign exchange market for happy pounds. What is the equilibrium exchange rate? b.) Show with the help of a graph whether the Central Bank of Happy Land has to buy or sell happy pounds to keep up the fix. c.) Are Happy Land's foreign currency reserves going to increase or decrease? 1.) Happy Land is operating a fixed exchange rate against the dollar at 3.5 dollars per happy pound. Exchange Rate Quantity Demanded (dollars per happy pound) (billion happy pounds per day) 2.75 3.0 3.25 3.5 3.75 4.0 4.25 90 80 70 60 50 40 30 Quantity Supplied (billion happy pounds per day) 10 20 30 40 50 60 70 a.) Draw the supply and demand balance of the foreign exchange market for happy pounds. What is the equilibrium exchange rate? b.) Show with the help of a graph whether the Central Bank of Happy Land has to buy or sell happy pounds to keep up the fix. c.) Are Happy Land's foreign currency reserves going to increase or decrease?

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