What is a fixed exchange rate and how is its value fixed?
What will be an ideal response?
A fixed exchange rate policy is an exchange rate that is pegged at a value decided by the government or central bank. The central bank directly intervenes in the foreign exchange market to block the unregulated forces of supply and demand from changing the exchange rate away from its pegged value. For instance, if a central bank wanted to hold the exchange rate steady in the presence of diminished demand for its currency, the central bank props up demand by buying its currency in the foreign exchange market to keep the exchange rate from falling. If the demand for its currency increases, the central bank increases the supply by selling its currency and keeps the exchange rate from rising.
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Dissaving occurs when
A. income is greater than saving. B. saving is greater than the interest rate. C. saving is greater than consumption. D. income is less than consumption.
The above table gives the initial balance sheet for Mini Bank. If the bank's desired reserve ratio is 10 percent, how much does this bank have in excess reserves?
A) $60 B) $90 C) $40 D) $10
All of the following are major factors limiting economic growth in developing countries EXCEPT
A) dead capital. B) deregulation. C) inefficient government regulation. D) corruption.
A shortage exists
A) in equilibrium. B) when quantity supplied is greater than quantity demanded. C) when quantity supplied is less than quantity demanded. D) at the market clearing price.