Under a Fixed Exchange Standard,if the Domestic Demand for Foreign

question 23

Multiple Choice

Under a fixed exchange standard,if the domestic demand for foreign exchange increases

• A)the central monetary authority must meet the demand out of its reserves.
• B)the central monetary authority must increase the supply of domestic money.
• C)the fixed exchange standard will breakdown.
• D)inflation will increase.
• E)the domestic currency must be depreciated.

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Definitions:

Protectionism

An economic policy where governments impose restrictions on imports to protect domestic industries from foreign competition, often through tariffs, quotas, and other trade barriers.

Currency Exchange Rate

The value of one currency for the purpose of conversion to another.

Country's Currency

The legal tender issued by a country's government, used as a medium of exchange within its economy.

Income Distribution

The way in which total income is shared amongst the population or different groups within society.