Suppose the government of South Island has fixed the value of its currency, the Islandia, at $0.50 per Islandia, but the market equilibrium value of the Islandia is $0.25 per Islandia. In order to maintain the official value of the Islandia the Central Bank of South Island must either ________ domestic interest rates or purchase Islandia, which causes the supply of international reserves to ________.
A. lower; decrease
B. lower; increase
C. raise; increase
D. raise; decrease
Answer: D
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Everything else held constant, a decrease in autonomous planned investment spending will cause the IS curve to shift to the ________ and aggregate demand will ________
A) right; increase B) right; decrease C) left; increase D) left; decrease
A tariff is better than a quota because
a. it does not distort trade as much. b. quotas are inflexible. c. tariffs produce tax revenue. d. quotas hurt domestic producers; tariffs hurt foreign producers.
There is no correlation between more years of schooling and increased earnings.
A. True B. False C. Uncertain
Economists speaking like policy advisers make
a. claims about how the world is. b. descriptive statements. c. normative statements. d. More than one of the above is correct.