To Maintain a Fixed Exchange Rate Under a Shortage of FX

question 162

Multiple Choice

To maintain a fixed exchange rate under a shortage of FX reserves, the government has the following options, except

• A)encourage foreign investment inflows, and restrict foreign investment outflows.
• B)encourage imports, and discourage exports.
• C)impose exchange controls or capital controls.
• D)use monetary or fiscal policies to reduce domestic spending.

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Definitions:

Aphagia

The inability to swallow or the loss of swallowing reflex, often due to neurologic or muscular disorders.

Hyperphagia

Overeating that leads to significant weight gain.

Lesioned

Having suffered damage or injury to a body part, organ, or tissue, often referring to specific areas of the brain in medical contexts.

Hypothalamus

A small region of the brain that plays a critical role in hormone production, regulation of body temperature, hunger, thirst, and circadian rhythms.