Question: S p e g g e d = USD 1 USD 0 . BSD a . The pegged rate of USD 1 . 0 0
USD
USD
BSD
a The pegged rate of USD undervalues the BSD as compared to the freefloating equilibrium rate
b At the pegged rate of USD BSD there is excess private sector demand for the Bahamian dollar
c At the pegged rate of USD BSD there is excess private sector supply for the Bahamian dollar
d To maintain the pegged rate, the Central Bank of the Bahamas would have to demand BSD from the foreign exchange market buy BSD and sell USD
e and
f a and
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