If a Country Pegs Its Currency to a Foreign Currency

question 79

Multiple Choice

If a country pegs its currency to a foreign currency, it no longer has the ability to use monetary policy to stabilize the economy because:

• A)it no longer has a central bank.
• B)monetary policy must be used to keep the exchange rate's market equilibrium value at its official value.
• C)banks will begin to hold 100% of their deposits in reserves.
• D)it must eliminate its currency from circulation and replace it with the foreign currency.

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Definitions:

Kanban Size

Kanban size refers to the quantity of work or production capacity represented by a kanban card in a lean manufacturing system, aimed at controlling the flow of resources through the production process.

Setup Cost

The expenses involved in configuring a process, machine, or system for a particular production run or task.

Carrying Cost

The total cost of holding inventory, including storage, insurance, taxes, depreciation, and opportunity costs.

Safety Stock

Extra inventory kept in reserve to mitigate the risk of stockouts due to fluctuations in supply and demand, serving as a strategic insurance against variability in lead times.