Suppose the Target Exchange Rate Set by the Fed Is

question 152

Multiple Choice

Suppose the target exchange rate set by the Fed is 150 yen per dollar. If the demand for dollars permanently decreases the Fed

• A) can permanently meet the target by selling dollars.
• B) must violate both interest rate parity and purchasing power parity to permanently meet the target.
• C) can permanently meet the target by buying dollars.
• D) cannot permanently maintain the target rate.

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Definitions:

UCC Balance

The outstanding balance on a loan or financing arrangement under the Uniform Commercial Code, often related to personal property loans.

Tax Deductible

Expenses that can be subtracted from gross income to reduce the taxable income, thus lowering the overall tax liability.

Capital Cost Allowance (CCA)

A tax deduction in Canada that represents a business's investment in depreciable properties, allowing for the asset's cost to be written off over its useful life.

Taxable Income

The amount of an individual's or a corporation's income used to determine how much tax is owed to the government in a given tax year.