When Countries Seek to Maintain Fixed Exchange Rates Through Intervention

question 409

Multiple Choice

When countries seek to maintain fixed exchange rates through intervention, their governments or central banks:

• A) never have to intervene in currency markets because the exchange rate is fixed.
• B) may have to stop printing domestic currency.
• C) must buy domestic currency when foreign demand for it increases.
• D) must sell domestic currency when foreign demand for it increases.

---

Definitions:

Pizzas

A popular dish made from yeasted flatbread typically topped with tomato sauce, cheese, and various toppings and then baked.

Mutual Gains

A situation or outcome in negotiation or economics where all parties involved benefit or profit.

International Trade

The exchange of goods, services, and capital across international borders or territories.

Inflationary

Related to or indicative of the increase in prices of goods and services over time, leading to a decrease in the purchasing power of money.