A Declining Amount of Foreign-Exchange Reserves Resulting from Maintaining a Pegged

question 120

Multiple Choice

A declining amount of foreign-exchange reserves resulting from maintaining a pegged exchange rate would have which of the following effects?

• A) a decrease in domestic money supply
• B) a negative item entry in the balance of payments statement
• C) rising inflationary pressure
• D) an increase in the supply of local currency coming from this nation's central bank

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Definitions:

Useful Life Estimates

Projections or assessments of the duration during which an asset is expected to be economically viable and productive for its intended purpose.

Revaluation Surplus

The increase in an asset's carrying amount as a result of a revaluation, recognized in equity.

Financial Period

A specified duration of time used for financial reporting and accounting purposes, typically one year or one quarter.

Revaluation Surplus

Revaluation surplus is an accounting term that refers to the increase in value of an asset, recognized after its revaluation exceeds its previously recorded value.