Under a Fixed Exchange Rate System,the Central Bank Must

question 35

Multiple Choice

Under a fixed exchange rate system,the central bank must

• A)keep interest rates constant relative to the country they are targeting.
• B)keep money growth constant relative to the country they are targeting.
• C)follow a constant money growth rule.
• D)allow the money supply to adjust only to whatever level will ensure the exchange rate remains unchanged.

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Definitions:

Inelastic Demand

A situation where the demand for a product does not change significantly with a change in its price.

Price-Discriminating

A pricing strategy where a company charges different prices for the same product or service to different market segments based on willingness to pay.

Elastic Demand

Refers to a market situation where the quantity demanded of a product is highly responsive to changes in its price.

Price Discrimination

A pricing strategy where a company charges different prices for the same product or service depending on the customer, market, or region.