Policy Makers Can Select from a Number of Different Exchange

question 1

Multiple Choice

Policy makers can select from a number of different exchange rate regimes and exchange rate policies. Which of the following policies would most likely represent a hard peg?

• A) Revaluation.
• B) Devaluation.
• C) Dollarisation.
• D) Flexible exchange rates.
• E) Crawling peg.

---

Definitions:

Shutdown Point

The level of output and price at which a firm's total revenue just covers its variable costs; below this point, the firm would cease production.

Maximizing Losses

Contrary to economic rationality, refers to theoretical actions or strategies that would lead to the greatest possible financial losses.

Diminishing Returns

A principle stating that as more investment is made in a particular resource, the marginal gain in output will eventually decrease.

Fixed Factor

Inputs in production that cannot be easily increased or decreased in the short term, such as buildings and land.