Suppose that the market demand and supply functions for Mexican pesos vs. dollars (the currency in the rest of the world) in the spot market are given by Qd=1000150e,Qs=500+100e. i) What is the equilibrium dollar price of pesos? What is the equilibrium quantity of pesos traded? Describe the underlying sources of demand and supply of pesos, i.e., who demands and who supplies pesos, with/for what, for what purposes? Depict the market in a diagram. ii) If the central bank in Mexico attempts to fix the value of the peso in terms of the dollar at a price of $1.50 per peso, is the peso undervalued or overvalued relative to its market equilibrium dollar price? Is there a gain or loss of foreign/dollar reserves at the central bank of Mexico? What is the size of the gain or loss in terms of pesos, and the value in terms of dollars? Depict this situation on a diagram of the foreign exchange market for pesos and describe how the gain or loss of foreign exchange reserves is reflected in Mexico's balance of payments accounts. iii) What would be the consequences for the peso money supply and hence the macroeconomy of Mexico of a continued peg of the peso at $1.50 ? What action could the Mexican central bank take to mitigate the consequence of the peg for Mexico's money supply and macroeconomy? Comment on the implications of the macroeconomic effects of the peg for sustainability of the fixed exchange rate regime