Under a Fixed Exchange Rate System,the Central Bank of a Country

question 105

Multiple Choice

Under a fixed exchange rate system,the central bank of a country experiencing a balance of payments deficit will:

• A)increase the supply of the domestic currency to prevent currency depreciation.
• B)increase the demand for the domestic currency to prevent currency depreciation.
• C)increase the supply of domestic currency to prevent a currency appreciation.
• D)increase the demand for domestic currency to prevent a currency appreciation.

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Definitions:

Challenges

In a general context, challenges are obstacles or difficulties that need to be overcome, often requiring effort, skill, or strategy.

Flow

A mental state of deep involvement and immersion in an activity where an individual experiences focus, engagement, and a sense of satisfaction.

Effort

The use of physical or mental energy to achieve a goal or accomplish a task.

Personal Constructs

Cognitive structures individuals use to interpret and predict events, prominently featured in George Kelly’s personal construct theory.