Under Fixed Exchange Rates, When a Foreign Central Bank Devalues

question 47

Multiple Choice

Under fixed exchange rates, when a foreign central bank devalues its currency it

• A)lowers the dollar price of its currency
• B)raises the dollar price of its currency
• C)purchases dollars in the foreign exchange market
• D)sells dollars in the foreign exchange market
• E)adds a variety of other foreign currencies to its reserves

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Definitions:

Aztecs

Aztecs were a Mesoamerican culture that flourished in central Mexico in the post-classic period from the 1300s to the 1520s, before being conquered by the Spanish.

Expected Value

A statistical measure that calculates the average outcome when the future includes scenarios that may or may not happen.

Payoffs

The outcomes or returns from a particular action, investment, or decision, often used in game theory and economics.

Invest

To distribute funds or resources in anticipation of earning profits or income.