If the Fed Decides to Maintain a Fixed Euro/dollar Exchange

question 64

Multiple Choice

If the Fed decides to maintain a fixed euro/dollar exchange rate when they purchase euros:

• A) they increase the number of dollars.
• B) downward pressure is put on domestic interest rates.
• C) the domestic money supply increases.
• D) all of the answers given are correct.

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Definitions:

External Cost

Costs that are not borne by the producer or consumer, but by a third party or the environment, such as pollution.

Air Conditioning

A system for controlling the humidity, ventilation, and temperature in a building or vehicle to provide a comfortable indoor environment.

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Police Protection

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