When a Currency's Exchange Rate Is Pegged to the United

question 44

Multiple Choice

When a currency's exchange rate is pegged to the United States (US) dollar and the value is fixed below the equilibrium exchange rate as expressed in US dollars per the currency, then in order to maintain the peg, the country's central bank must:

• A)raise interest rates to raise the demand for the domestic currency.
• B)not interfere in the foreign exchange market.
• C)buy up the excess domestic currency with US dollars.
• D)sell the surplus domestic currency for US dollars.

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Definitions:

Endorser's Signature

The signature of the person who endorses a document, often found on checks or financial instruments, indicating their approval or transfer of rights.

Blank Endorsement

A payee’s or last endorsee’s signature on a negotiable instrument.

Payee's Signature

The signature of the individual or entity that is entitled to receive payment on a financial instrument, such as a check or promissory note.

Last Endorsee

The final person or entity to whom a negotiable instrument, such as a cheque, has been legally transferred.