Syria uses a fixed exchange rate system. The Syrian pound was once fixed at an exchange rate of 50 Syrian pounds to the US dollar. The country backs its currency with dollar reserves.

a. Show this dynamic in a suitable supply and demand graph describing the market for Syrian pounds. Make sure accurately label all your axes.

b. Syria then got hit by a civil war, starting in 2011, with the destruction of infrastructure and disruption of trade routes hitting the economy especially hard. Show this result in your model in (a).

c. An article states that the Syrian pound crashed over the recent months in the war-torn country, hitting records low and throwing more Syrians into poverty. The central bank said the official price of the dollar will be 2,500 pounds. Is this consistent with your prediction in (b)? Explain.

d. The article then goes on to say: Despite devaluing the currency to a lower fixed rate, the Syrian pound currently trades on the black market at 4,500 pounds to one U.S. dollar. Does this mean that, at the current official price, the Syrian pound is overvalued, undervalued, or something else still? Show this result on your graph.

e. Given your answers above, what do you expect happen in the Syrian economy?