Question 19N.3.HL.TZ0.3f.i
| Date | November 2019 | Marks available | [Maximum mark: 1] | Reference code | 19N.3.HL.TZ0.3f.i |
| Level | HL | Paper | 3 | Time zone | TZ0 |
| Command term | Calculate | Question number | f.i | Adapted from | N/A |
In the country of Gardia, the currency is the gamma. The exchange rate of the United States dollar (US$) to the gamma is US$ 1 = 6.20 gamma.
Gardia received a loan of US$ 4 million from a foreign bank in 2018 when the exchange rate was US$ 1 = 5.3 gamma. It must pay back US$ 4.2 million (original amount borrowed plus interest) in 2019 when the exchange rate is US$ 1 = 6.2 gamma.
Both the gamma and the US$ are fully convertible currencies, which float freely in foreign exchange markets. The supply and demand for US$ (in billions) are given by the functions
where g is the exchange rate of the US$ in terms of the gamma, is the quantity of US$ supplied per month and is the quantity of US$ demanded per month.
The demand (D) function is represented in Figure 2.
Assume that the monthly supply of US$ changes to the function
Using Figure 2, calculate how many US$ are needed to buy one gamma at the new exchange rate.
[1]
US$ = US$ 0.29 or 0.29 or 29 cents
Either of the above equivalent answers is sufficient for [1].
OFR applies.
For OFR divide 1 by the equilibrium value that appears on the plot or whatever is indicated on the vertical axis that is given by the intersection of demand and supply.
