Under a System of Fixed Exchange Rates, a Nation Can

question 16

Multiple Choice

Under a system of fixed exchange rates, a nation can try to remedy its balance of payments deficit by:

• A) Applying expansionary macroeconomic policy to drive prices up and interest rates down.
• B) Applying restrictive macroeconomic policy to keep prices down and interest rates up.
• C) Reducing its income from investments abroad.
• D) Building up its reserves of foreign currencies and reserve balances with the International Monetary Fund.

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Definitions:

Propositional

Pertaining to or involving propositions, which are statements or expressions in logic that can be either true or false.

Prototype Theory

A model of categorization in cognitive science where some members of a category are more central or "prototypical" than others.

Memorize

The process of committing information to memory for later retrieval.

Research

The systematic investigation into and study of materials and sources in order to establish facts and reach new conclusions.