Suppose the government of south island has fixed the value of its currency, the islandia, at $0.50 per islandia, but the market equilibrium value of the islandia is $0.25 per islandia. in order to maintain the official value of the islandia the central bank of south island must either domestic interest rates or purchase islandia, which causes the supply of international reserves to
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Suppose the government of south island has fixed the value of its currency, the islandia, at $0.50 p...
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