Suppose a central bank tries to keep exchange rates fixed. When there is an increase in the demand for foreign goods, the central bank will most likely
A) buy foreign currency in exchange for the domestic currency.
B) do nothing.
C) sell the domestic currency in exchange for foreign reserves.
D) use foreign reserves to buy the domestic currency.
Answer: D
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Which of the following most closely resembles a perfectly competitive market?
a. the airline industry b. the soft drink industry c. the wheat market d. long-distance telephone service
If the short run elasticity of demand for widgets is 0.7 and the long run elasticity of demand for widgets is 1.5, an increase in price will ____ total revenue in the short run and ____ total revenue in the long run. a. Increase; increase
b. Increase; decrease. c. Decrease; increase. d. Decrease; decrease.
Pizza is a normal good if the demand
a. for pizza rises when income rises. b. for pizza rises when the price of pizza falls. c. curve for pizza slopes upward. d. curve for pizza shifts to the right when the price of burritos rises, assuming pizza and burritos are substitutes.
We must be knowledgeable of how people behave in strategic situations if we are to understand
a. perfectly competitive markets. b. monopolistically competitive markets. c. oligopolistic markets. d. All of the above are correct.