With Fixed Exchange Rates, Assume That the Home Currency Becomes

question 139

Multiple Choice

With fixed exchange rates, assume that the home currency becomes undervalued-that is, above its par value when expressed as the home currency price of the foreign currency.Other things equal, to maintain the fixed exchange rate the home country's central bank must

• A) sell the home currency and purchase foreign currencies.
• B) sell the home currency and sell foreign currencies.
• C) purchase the home currency and sell foreign currencies.
• D) purchase the home currency and purchase foreign currencies.

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Definitions:

Total Profit

The overall financial gain calculated by subtracting total costs from total revenue.

Collude

To come together in secret agreement, especially for a deceitful or illegal purpose.

Marginal Cost

The increase in total cost that arises from producing one additional unit of a product or service.

Annual Fixed Cost

Regular, unchanging expenses incurred by a business, regardless of its level of production or sales volume within a year.