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:

Cyclopentane

A saturated hydrocarbon with the molecular formula C5H10, consisting of a ring of five carbon atoms.

Organic Products

Compounds predominately containing carbon and hydrogen, which may also include oxygen, nitrogen, and other elements, usually resulting from organic reactions.

Thermodynamic

The branch of physics that deals with the relationships and conversions between heat and other forms of energy.

Kinetic

Relating to or involving the motion of objects and the forces associated with them.