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If the Market Equilibrium Value of the Nominal Exchange Rate

question 99

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If the market equilibrium value of the nominal exchange rate equals 0.20 U.S. dollars per franc, but the franc is officially fixed at 0.25 U.S. dollars per franc, then the franc exchange rate is ________ and to maintain this exchange rate there will be ________ in the government's stock of international reserves.


Definitions:

Income Component

Income Component pertains to the portion of a financial product's return that is generated from the payment of interest or dividends.

Capital Gain

The profit earned from the sale of an asset like stocks, bonds, or real estate, which exceeds its purchase price.

Asset Classes

Categories of investments that exhibit similar characteristics, behaviors on the market, and are subject to the same laws and regulations.

Past Performance

Indicates the historical financial results or operational achievements of a company, used as an indicator of potential future results.

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