Suppose that we are in the early days of the Bretton Woods system, and France has

declared a par value for the French franc at FF6 per dollar.
The allowable fluctuation band
is one percent on either side of par. What is the price ceiling for the dollar in terms of French
francs? What is the price floor? Suppose that France then devalues the franc and sets
a new par at FF8 . What are the new price ceiling and floor?

1 answer