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?