Question

1) Suppose U.S. demand for the Gizz is given by: e = 20 - 0.1Gizz and Gisslovia's supply of Gizz

is given by e = 0.5 + 0.15Gizz, what is the equilibrium value for the Dollar-Gizz exchange rate?

2) How many Gizz would be demanded if e was fixed at 11.5? How many Gizz would be supplied? Which country has the balance of payment deficit?

3) Given the value of e in #1 what is the dollar price of a good that costs 20 gizz? What is the Gizz price of a good with a price of $244.00?

4) What happens to the results in #3 if the exchange rate is the value in #2? What are the implications for trade between the U.S. and Gisslovia?

#### Top Answer

(1) Exchange rate = 12.2 gizz/$ (2) Demand for Gizz by US is 85,... View the full answer