Refer to the Figure Below to Answer the Following Questions

question 21

Multiple Choice

Refer to the figure below to answer the following questions.

Figure 25.3.1
-In Figure 25.3.1, suppose the demand for dollars temporarily decreases so that the demand curve shifts to D₂. To maintain the target exchange rate, the Bank of Canada

• A)sells dollars.
• B)buys dollars.
• C)must violate both interest rate parity and purchasing power parity.
• D)must raise the target exchange rate.
• E)must lower the target exchange rate.

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Definitions:

Nash Equilibrium

The point in a game where each player's strategy is optimal given the strategies of all other players, with no incentive to deviate.

Simultaneous Move Game

A type of strategic game in which all players make their decisions at the same time, without knowledge of the other players' choices.

Bargain Hard

Bargain hard refers to the act of negotiating with determination and strategy to achieve the most advantageous terms possible in a deal or transaction.

Sequential Game

A type of game theory scenario where players make decisions one after another rather than simultaneously.