If a Country with a Fixed Exchange Rate Faces a Fundamental

question 41

Multiple Choice

If a country with a fixed exchange rate faces a fundamental disequilibrium because it has a large, ongoing surplus in it official settlements balance, which of the following policies can it employ to try to achieve external balance?

• A)Impose import barriers
• B)Raise interest rates
• C)Allow the exchange rate to float
• D)Obtain a loan from the IMF

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Definitions:

Aerobic Activity

Physical exercise that improves the efficiency of the body's cardiovascular system in absorbing and transporting oxygen.

Relaxation Response

A physiological state of deep rest that can be elicited through various practices such as meditation or deep breathing, counteracting stress effects.

Religion-based Techniques

Strategies or practices grounded in religious beliefs used to solve problems, improve well-being, or achieve spiritual goals.

Active Attitude

A proactive and engaged approach to situations, characterized by taking initiative and directly influencing outcomes.