Suppose the Bank of Canada Follows a Fixed Exchange Rate

question 75

Multiple Choice

Suppose the Bank of Canada follows a fixed exchange rate of $1 U.S. per Canadian dollar. If the demand for Canadian dollars temporarily increases, to maintain the target exchange rate, the Bank can

• A)sell Canadian dollars.
• B)buy Canadian dollars.
• C)violate interest rate parity.
• D)violate purchasing power parity.
• E)enforce interest rate parity.

---

Definitions:

S Corporations

A type of corporation that meets specific Internal Revenue Code requirements, allowing profits to be passed directly to shareholders and avoid double taxation.