Suppose That Econland Has a Fixed Exchange-Rate System

question 248

Multiple Choice

Suppose that Econland has a fixed exchange-rate system. Econland's government (its central bank) will exchange as much local currency (say pesos) for foreign currency (say dollars) and as much foreign currency (say dollars) for local currency (say pesos) as is necessary to maintain the peg. Which of the following statements is not true?

• A)Satisfying requests by people to get local pesos in exchange for foreign dollars is easy for the central bank to do.
• B)The central bank has a restricted capacity to satisfy requests by people to get foreign dollars in exchange for local pesos.
• C)Being the central bank, it has an equal capacity to satisfy requests to exchange dollars for pesos, and pesos for dollars.
• D)The central bank needs to stockpile some foreign-exchange reserves in order to maintain the peg.

---

Definitions:

Worker Productivity

The measurement of the efficiency and output of workers within a specific period, often assessed at individual, departmental, or company-wide levels.

Random Assignment

A method used in experiments where participants are randomly allocated to different groups to ensure each group is statistically similar, thus increasing the validity of the results.

Control Group

In an experiment, the group of participants that does not receive the experimental treatment, serving as a comparison to evaluate the effect of the treatment.

Distracting Sounds

Auditory stimuli that divert attention away from a focal task or activity, potentially reducing performance or concentration.