The demand for dollars (in exchange for pesos) is given byand the supply of dollars is given by QS=10+2epesos /$ . There is an equilibrium or fundamental exchange rate based on these demand/supply conditions. Now suppose that the central bank of Mexico pegs the peso so that 20 pesos buy one dollar. This is(Q1 Blank) of the peso relative to the fundamental value. To protect this peg, the central bank needs to(Q2 Blank) (Q3 blank) dollars.

(Same options for each question blank, can be used more than once)

a. 10

b. 20

c. 40

d. 50

e. 60

f. overvaluation

g. undervaluation

h. buy

i. sell