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

question 50

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:

IR Spectroscopy

A technique used in analytical chemistry to identify molecular structure through the absorption of infrared radiation by molecules, leading to vibrational and rotational changes.

Electronegativity

A measure of the tendency of an atom to attract a bonding pair of electrons towards itself in a molecule.

Frequency

The number of occurrences of a repeating event per unit time.

Characteristic Stretching

The unique vibration of molecular bonds within a molecule, used in infrared spectroscopy to identify specific functional groups.