Suppose the Bank of Canada Follows a Fixed Exchange Rate

question 75

Multiple Choice

Suppose the Bank of Canada follows a fixed exchange rate of $1 U.S. per Canadian dollar. If the demand for Canadian dollars temporarily increases, to maintain the target exchange rate, the Bank can

• A)sell Canadian dollars.
• B)buy Canadian dollars.
• C)violate interest rate parity.
• D)violate purchasing power parity.
• E)enforce interest rate parity.

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Definitions:

Null Hypothesis

A statement in statistics that suggests there is no statistical significance in a set of given observations, indicating no effect or no difference.

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Bermuda Grass

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Null Hypothesis

A statistical hypothesis that assumes no significant difference or effect exists in a particular set of observations, usually serving as the default assumption in hypothesis testing.