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

question 16

Multiple Choice

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

Sales

Sales refer to the total revenue earned from goods or services sold by a company during a specific period.

Variable Cost

Costs that vary directly with the level of production or service delivery, such as raw materials and direct labor.

Work in Process Inventory

Inventory of unfinished goods that are still in the process of production, accounting for materials, labor, and overhead.

Direct Labour Costs

Direct labour costs are the wages and other associated expenses for employees who are directly involved in the production of goods or services.