What Would the Fed Have Done If It Had Tried

question 71

Multiple Choice

What would the Fed have done if it had tried to keep the exchange rate at its 2001 level?

• A) buy dollars and sell euros
• B) buy dollars and buy euros
• C) sell dollars and buy euros
• D) sell dollars and sell euros
• E) None of the above are correct because the Fed cannot affect the exchange rate.

---

Definitions:

High-low Method

A technique used in cost accounting to estimate fixed and variable costs based on the highest and lowest levels of activity.

Net Operating Income

The net profit of a business is calculated by deducting operating expenses from the gross profit and before accounting for interest and taxes.

Sales Volume

The number of units sold within a reporting period, used as a measure of business activity.

Margin of Safety

The difference between actual sales and the break-even point, indicating how much sales can drop before a company incurs a loss.