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

question 44

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

---

Definitions:

Midpoint Formula

A method used in economics to calculate the elasticity of demand or supply by taking the average of the initial and final prices and quantities.

Total Revenue

The total amount of money a company receives from its goods or services, calculated by multiplying the price per unit by the number of units sold.

Quantity Effect

The impact on total consumption or production as a result of a change in quantity, holding price constant.

Price Effect

The change in consumption resulting from a change in the price of a good or service, influencing consumer behavior.