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

question 38

Multiple Choice

Suppose that Econland adopts a fixed exchange-rate system and pegs the value of its peso to the U.S. dollar. If people's demand for pesos 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:

Supervision

Supervision involves overseeing, directing, and guiding individuals and groups in the completion of tasks and fulfillment of goals.

Profit-Sharing

A company policy of distributing a portion of its profits to its employees, often based on their performance or as part of their compensation.

Stock Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a stock at an agreed-upon price within a certain timeframe.

Incentive System

An incentive system is a business tool that uses rewards and penalties to motivate employees to achieve specific objectives and improve performance.