Question 19N.3.HL.TZ0.d

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

$Qs=-2+g$

$Qd=10-2g$

where g is the exchange rate of the US$ in terms of the gamma, $Qs$ is the quantity of US$ supplied per month and $Qd$ is the quantity of US$ demanded per month.