With a Fixed Exchange Rate, When the Quantity Supplied Exceeds

question 28

Multiple Choice

With a fixed exchange rate, when the quantity supplied exceeds the quantity demanded, the central bank must intervene in the foreign exchange market and

• A) buy reserve currencies and the domestic currency.
• B) sell reserve currencies and the domestic currency.
• C) support stock market prices.
• D) sell reserve currencies and buy the domestic currency.
• E) sell bank stocks to support consumer confidence.

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Definitions:

Keynes

Referring to John Maynard Keynes, a British economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments.

Large-Scale Unemployment

A situation where a significant portion of the workforce is without jobs, often due to economic downturns, industrial changes, or structural shifts in the economy.

Aggregate Demand

The comprehensive requirement for goods and services across an economy at an established price point within a specific period.

Aggregate Demand Curve

A graph showing the relationship between the total quantity of goods and services demanded across all levels of prices in an economy.