Refer to the Above Diagram Where D and S Are

question 71

Multiple Choice

Refer to the above diagram where D and S are Canada's demand for and supply of Swiss francs.At the equilibrium exchange rate, E, Canada's balance of payments is in equilibrium.Under a system of fixed exchange rates, the shift in demand from D to D' will cause:

• A)Canada to increase its stocks of international monetary reserves.
• B)a Swiss balance of payments deficit.
• C)a Canadian balance of payments deficit.
• D)a Canadian balance of payments surplus.

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Definitions:

Realized Gain

The profit earned from the sale of an asset, which has been converted from an unrealized gain into cash or an equivalent.

Available-For-Sale

A classification for securities that are not held to maturity or for trading purposes, with unrealized gains or losses reported in equity.