Suppose the Bank of Canada Fixes the Canada-U

question 148

Multiple Choice

Suppose the Bank of Canada fixes the Canada-U.S.exchange rate between the limits of Cdn$1.10 and Cdn$1.20 to the U.S dollar.If the free-market equilibrium exchange rate would otherwise be Cdn$1.25,then the

• A)Bank of Canada needs to engage in expansionary monetary policy to support the dollar.
• B)Government of Canada must reduce spending and increase taxes.
• C)Bank of Canada must sell U.S.dollars.
• D)Bank of Canada must buy U.S.dollars.
• E)Federal Reserve System in the Untied States is required to increase the number U.S.dollars circulating in Canada.

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Definitions:

Satisficing

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Optimizing

The process of making something as fully perfect, functional, or effective as possible.

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Shafir, Simon, And Tversky

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