Suppose That Econland Adopts a Fixed Exchange-Rate System and Pegs

question 50

Multiple Choice

Suppose that Econland adopts a fixed exchange-rate system and pegs the value of its peso to the U.S. dollar. If Econlanders' demand for dollars increases in the foreign exchange markets, then Econland's foreign-exchange reserves will

• A)increase.
• B)decrease.
• C)stay the same.
• D)equal the trade balance.

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Definitions:

Fluids

Substances that have no fixed shape and yield easily to external pressure; gas or liquid.

Ménière's Disease

A disorder of the inner ear causing vertigo, tinnitus, hearing loss, and a feeling of fullness or congestion in the ear.

Vertigo

A condition characterized by a sensation of spinning or dizziness, often caused by problems within the inner ear or the vestibular nerve.

Tinnitus

The perception of noise or ringing in the ears, a common problem that can result from various underlying causes and can affect one's quality of life.