The Demand for the Franconian Franc in the Foreign Exchange

question 128

Multiple Choice

The demand for the Franconian franc in the foreign exchange market equals 11,000 - 25,000e and the supply of francs in the foreign exchange market equals 9,000 + 25,000 e, where e is the nominal exchange rate expressed in U.S. dollars per franc. If the franc is fixed at 0.15 U.S. dollars per franc, then the franc is ________ and Franconia has a balance-of-payments ________.

• A)overvalued; surplus of 5,500 francs
• B)undervalued; surplus of 5,500 dollars
• C)overvalued; deficit of 5,500 francs
• D)undervalued; deficit of 5,500 francs

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Definitions:

Defalcation

Refers to the misappropriation of funds or embezzlement by a person entrusted with their care but not necessarily fraud.

False Entries

The intentional act of entering incorrect or misleading information into records or documents, often for fraudulent purposes.

Investment Swindle

A fraudulent scheme designed to deceive investors into giving money on the premise of receiving significantly higher returns.

Ponzi Scheme

A fraudulent investing scam promising high rates of return with little risk to investors, which generates returns for earlier investors by acquiring new investors.