Under a system of fixed exchange rates, what happens if a country's currency is overvalued?
A. The central bank gains official reserve assets.
B. The central bank loses official reserve assets.
C. The exchange rate rises.
D. The currency appreciates.
Answer: B
You might also like to view...
Suppose you and your friend are in a shopping mall and you borrow $100 from your friend to pay for a pair of shoes that you purchase in a sho
A) transaction costs. B) indirect financing. C) direct financing. D) moral hazard.
If domestic saving exceeds investment, there will be a current account surplus
Indicate whether the statement is true or false
Monetary policy can have substantial effects on the economy even when nominal interest rates are very low
A) since real rates are what affects borrowing and spending decisions. B) by improving borrower and bank balance sheets. C) by reducing transactions costs. D) only when the policy is substantial.
The Peruvian economy can be characterized by Equation 24.4.EQUATION 24.4:C = 400 + 0.6YdTaxes = 600Equilibrium Output = $4,000Refer to Equation 24.4. At equilibrium, government purchases in Peru is
A. 2,040. B. 1,560. C. 1,440. D. cannot be determined from the given information