If a Country Wants to Keep the Value of Its

question 17

Multiple Choice

If a country wants to keep the value of its currency fixed, then its central bank should

• A) sell domestic goods when there is an increase in the supply of its domestic currency.
• B) buy domestic goods when there is an increase in the supply of its domestic currency.
• C) sell its domestic currency when there is an increase in the supply of that currency.
• D) buy its domestic currency when there is an increase in the supply of that currency.

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Definitions:

Net Cash Inflows

The amount of cash that a company receives minus the cash it spends over a period.

Cash Payback Method

The cash payback method is a capital budgeting technique that calculates the time needed to recoup the cost of an investment based on its expected cash flows.

Period

A length of time during which a series of events or an action takes place or is completed.

Salvage Value

The estimated residual value of an asset at the end of its useful life, often used for depreciation calculations.