If the Bank of Canada Sets a Target Exchange Rate

question 5

Multiple Choice

If the Bank of Canada sets a target exchange rate that is higher than the current exchange rate,then

• A)the Bank must sell dollars.
• B)the Bank must buy dollars.
• C)the Bank can do nothing in the short run.
• D)will print more dollars for foreign distribution.
• E)None of the above.

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Definitions:

Accrual Basis

An accounting method where revenues are recorded when earned and expenses are recorded when incurred, regardless of when cash is exchanged.

Recognizes Revenues

The process of recording revenue in the financial statements when it is earned and realizable, in accordance with the revenue recognition principle.

Expense Recognition Principle

Accounting principle that dictates expenses should be recognized in the period in which they are incurred to generate revenues.

Accounting Period

This is a specific duration of time for which financial statements are prepared to understand and evaluate a company's financial performance.