If a Country's Central Bank Seeks to Stabilize the Price

question 14

Multiple Choice

If a country's central bank seeks to stabilize the price level and if nominal shocks from abroad are important, then

• A) a flexible exchange rate is preferable to a fixed exchange rate.
• B) flexible and fixed exchange rates are equivalent.
• C) the central bank will not be able to realize its goal.
• D) a fixed exchange rate is preferable to a flexible exchange rate.
• E) the central bank should devalue under fixed exchange rates.

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Definitions:

Kohler

Refers to Wolfgang Köhler, who was a German psychologist and a key figure in the development of Gestalt psychology, emphasizing insight in learning and problem-solving.

Cognitive Processing

The mental operations involved in acquiring, storing, retrieving, and using information.

Associative Learning

The learning method through which a connection is established between a pair of stimuli or between a behavior and a specific stimulus.

Errorless Discrimination Training

A training procedure in animal learning and educational techniques designed to minimize errors and reduce frustration by gradually introducing discriminative stimuli.