In a Target Zone System in Which the Money Supply

question 3

Multiple Choice

In a target zone system in which the money supply is to be varied in response to exchange rate variations as the exchange rate hits the ceiling or floor, if a country's exchange rate (units of home currency per unit of foreign currency) hits the ceiling, the monetary authorities would be required to __________ the money supply; this change in the money supply would be carried out in order to __________ the value of the home currency.

• A) increase; appreciate
• B) increase; depreciate
• C) decrease; appreciate
• D) decrease; depreciate

---

Definitions:

Marxian Inputs

Factors of production (labor, capital, etc.) as analyzed in Marxist economic theory, focusing on their exploitation and role in generating surplus value.

Production Function

A quantitative model that demonstrates how the inputs in the production process impact the goods or services output.

Supply Function

A mathematical expression that shows the relationship between the quantity of a good or service that producers are willing to sell and the price of the good or service.

Factor Price

The price of inputs used in the production of goods and services, such as labor wages or the cost of raw materials.