A Number of Situations Can Arise That Will Cause Individuals

question 54

Multiple Choice

A number of situations can arise that will cause individuals to believe that policy makers might change the pegged value of a fixed exchange rate.Suppose financial market participants expect a revaluation in the future.The interest parity condition will be maintained if which of the following policy actions are taken in the current period?

• A)a reduction in the pegged value of the domestic currency
• B)an increase in i
• C)a reduction in i
• D)an increase in government spending

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Definitions:

Working Memory

A cognitive system responsible for temporarily holding information available for processing, important for reasoning and the guidance of decision-making and behavior.

Short-Term Memory

A limited-capacity store that can maintain unrehearsed information for about 20 to 30 seconds.

Phonological Loop

A component of working memory model that deals with the auditory information, playing a key role in the processing and storage of verbal and auditory data.

Visuospatial Sketchpad

A component of working memory responsible for the temporary storage and manipulation of visual and spatial information.