If the Central Bank Does Not Purchase Foreign Assets When

question 54

Essay

If the central bank does not purchase foreign assets when output increases but instead holds the money stock constant,can it still keep the exchange rate fixed at ? Please explain with the aid of a figure.

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Definitions:

Payroll Tax Liability

The obligation of employers to withhold and pay taxes on behalf of their employees, such as social security and Medicare taxes.

Authorized Depository

A financial institution authorized to accept deposits from individuals and businesses.

Form 941

Form 941 is a quarterly tax form that employers use to report income taxes, social security tax, or Medicare tax withheld from employees' paychecks.

Payroll Tax Depositor

An entity or individual responsible for depositing payroll taxes collected from employers and employees to the appropriate tax authorities.