If a country has a balance of payments deficit and wishes to maintain the fixed value of its currency, it will generally
a. sell its own currency for foreign currencies.
b. buy its own currency with foreign reserves.
c. decrease taxes to increase domestic disposable income.
d. increase the money supply to keep interest rates down.
b
You might also like to view...
As a unit of account, money is used to
A) state prices of all goods and services. B) pay off future debts. C) hold purchasing power over time. D) exchange for goods and services.
Which of the following would not be included in the government consumption expenditures and gross investment (G) category of GDP?
a. The payments made to Social Security recipients. b. The expenditures made to repair a highway. c. The spending for professors at state universities. d. The purchase of new china for White House functions.
Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?
a. The real interest rate is the nominal interest rate times the rate of inflation. b. The real interest rate is the nominal interest rate minus the rate of inflation. c. The real interest rate is the nominal interest rate plus the rate of inflation. d. The real interest rate is the nominal interest rate divided by the rate of inflation.
The graph below shows the production possibilities curve for an economy producing two goods, X and Y. All of the following may allow the economy to produce combination D in the future, except?
A. Lower unemployment
B. Increasing labor supply
C. Economic growth
D. Technological advances