When Countries Seek to Maintain Fixed Exchange Rates Through Intervention

question 28

Multiple Choice

When countries seek to maintain fixed exchange rates through intervention, their governments or central banks

• A) rarely have to intervene in currency markets because the exchange rate is fixed.
• B) can always rely on foreign governments or central banks to intervene in currency markets when necessary.
• C) must buy domestic currency when foreign demand for their currency increases.
• D) must sell domestic currency when foreign demand for their currency increases.

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Definitions:

Absorption Costing

A method of costing that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Variable Costing

An accounting method that includes only variable costs - costs that change with production levels - in product cost calculations.

Net Operating Income

It refers to the profit generated from a company's ordinary, core business operations after subtracting operating expenses from operating revenues.

First Year

The initial year of operation, production, or accounting period.