Assume a Central Bank Exchanges Its Currency for Other Foreign

question 16

Multiple Choice

Assume a central bank exchanges its currency for other foreign currencies in the foreign exchange market, but does not adjust for the resulting change in the money supply. This is an example of:

• A)pegged intervention.
• B)indirect intervention.
• C)nonsterilized intervention.
• D)sterilized intervention.
• E)A and D

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Definitions:

Personal Income

The total earnings of an individual from all sources before taxes, including wages, dividends, interest, and rents.

Federal Government

the national government of a federal state, which shares power with regional or state governments under a system of federalism.

Individual Income

The total amount of money earned by a person from all sources before taxes.

Tax Competition

It refers to the phenomenon where countries or jurisdictions compete against each other to attract business through lower tax rates or more favorable tax regimes.