Under a fiXed Exchange Rate Regime, If There Is an Excess

question 7

True/False

Under a fixed exchange rate regime, if there is an excess demand for pounds in the forex market, the central bank is committed to purchasing the additional pounds.

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Definitions:

Income Elasticity

A measure of how much the demand for a good changes in response to a change in consumer income.

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices during a given period of time.

Cross-Price Elasticity

The responsiveness level of the quantity of a product needed when there's a fluctuation in the price of another product.

Cross-Price Elasticity

An assessment of how changes in the price of one good affect the demand for another good.