Under a Fixed Exchange Rate System,what Will a Contractionary Fiscal

question 27

Multiple Choice

Under a fixed exchange rate system,what will a contractionary fiscal policy lead to?

• A)a decrease in foreign reserves
• B)a depreciation of the domestic currency
• C)an appreciation of the domestic currency
• D)an increase in foreign reserves

---

Definitions:

Trait Activation Theory

A psychological theory proposing that certain situations can activate specific traits which then influence behavior.

Personality Traits

Enduring characteristics that describe an individual's behavior, attitude, and emotional patterns, contributing to their unique personality.

Personality

A combination of emotional, attitudinal, and behavioral response patterns of an individual that is distinct among people, influencing their interactions and reactions to various situations.

Psychological Characteristics

Traits or features of an individual's mental and emotional makeup, such as personality, attitudes, and cognitive abilities.