If the Bank of Canada Sets a Target Exchange Rate

question 4

Multiple Choice

If the Bank of Canada sets a target exchange rate that is higher than the current exchange rate, then

• A)the Bank will print more dollars for foreign distribution.
• B)the Bank should rethink its policy.
• C)the Bank can do nothing in the short run.
• D)the Bank must sell dollars.
• E)the Bank must buy dollars.

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Definitions:

Average Fixed Costs

The total fixed costs divided by the quantity of output produced; they decrease as output increases.

Silk Flower Arrangements

Artificial floral displays made from silk or similar synthetic materials, often used as decorations.

Variable Cost

Costs that change in proportion to the level of activity or volume of goods produced in a business.

Marginal Cost

The increase in cost that arises from producing one additional unit of a good or service.