If a Country with a Fixed Exchange Rate Is Continuously

question 32

Multiple Choice

If a country with a fixed exchange rate is continuously losing foreign reserves, speculators will:

• A)sell the country's currency and buy foreign currency.
• B)speculate that the country's currency will be revalued.
• C)buy the country's currency and sell foreign currency.
• D)lend foreign currency to the country's central bank.

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Definitions:

Completeness

In the context of preferences, the assumption that any two bundles of goods can be compared, meaning a consumer can decide if one is preferred, the other is preferred, or they are valued equally.

Transitivity

The concept in decision theory and economics that if preference or choice A is preferred to B, and B is preferred to C, then A must be preferred to C.

Marginal Rate

The additional cost or benefit associated with a small unit change in a variable or activity.

Indifference Curve

A graph representing combinations of two goods that provide the consumer with the same level of satisfaction, illustrating preferences.