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The following schedules summarize the supply and demand for trifflings, the national currency of Tricoli:
|
Triffling price (U.S. dollars per triffling) |
 0 |
$4 |
$8 |
$12 |
 $16 |
$20 |
$24 |
|
Quantity demanded (per year) |
 40 |
38 |
36 |
34 |
 32 |
 30 |
 28 |
|
Quantity supplied (per year) |
 1 |
11 |
21 |
31 |
 41 |
 51 |
 61 |
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Use the above schedules for the following:
(a) Graph the supply and demand curves.
(b) Determine the equilibrium exchange rate.
(c) Determine the size of the excess supply or excess demand that would exist if the Tricolian
government fixed the exchange rate at $22 5 1 triffling.
(d) Which of the following events would help reduce the payments imbalance? Which would not?
(A 5 helps; B 5 doesn’t help)
(i) Domestic inflation.
(ii) Foreign inflation.
(iii) Slower domestic growth.
(iv) Faster domestic growth.
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