A Country Wants to Maintain a Fixed Exchange Rate with the Dollar

question 181

Multiple Choice

A country wants to maintain a fixed exchange rate with the dollar, but at the current exchange rate its currency is in excess. Which policy can the country NOT adopt to maintain its exchange rate?

• A) Buy domestic currency and sell U.S. dollars in the foreign exchange market.
• B) Sell domestic currency and buy U.S. dollars in the foreign exchange market.
• C) Impose foreign exchange controls.
• D) Contract the money supply to raise domestic interest rates.

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Definitions:

Involuntary Movements

Uncontrolled, often spontaneous movements that can result from neurological disorders, medication side effects, or other diseases.

Prognosis

The predicted course and outcome of a disease, including chances of recovery, based on scientific data and the patient’s condition.

Veracity

Adherence to the truth; accuracy.

Deontology

An ethical theory that emphasizes duty, rules, and the inherent morality of actions, rather than their consequences.