1. Use the graph to answer the following questions.
a. According to the graph, is there a surplus or a shortage of baht in exchange for U.S. dollars? Briefly explain.
b. To maintain the pegged exchange rate, will the Thai central bank need to buy baht in exchange for dollars or sell baht in exchange for dollars? How many baht will the Thai central bank need to buy or sell?
2. The Economist observed the following: "In Argentina, many loans were taken out in dollars: this had catastrophic consequences for borrowers once the peg collapsed." What does the article mean that Argentina's "peg collapsed"? Why was this collapse catastrophic for borrowers in Argentina who had taken out dollar loans?