If a Country Wants to Keep Its Domestic Currency Overvalued

question 95

Multiple Choice

If a country wants to keep its domestic currency overvalued against a foreign currency,________.

• A) it will buy both the foreign and the domestic currency
• B) it will sell both the foreign and the domestic currency
• C) it will buy the domestic currency and sell the foreign currency
• D) it will buy the foreign currency and sell the domestic currency

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Definitions:

Full Employment

A situation in an economy where all available labor resources are being used in the most efficient way possible.

Equilibrium Price Level

This is the price point at which the demand for goods matches the supply, stabilizing the economic market without excess surplus or shortage.

Aggregate Demand Curve

Illustrates the total demand for all goods and services in an economy at various price levels, holding all else equal.

Aggregate Supply Curve

A graphical representation showing the relationship between the overall price level in an economy and the quantity of goods and services produced.