Suppose the Government of South Island Has Fixed the Value

question 41

Multiple Choice

Suppose the government of South Island has fixed the value of its currency, the Islandia, at $0.50 per Islandia, but the market equilibrium value of the Islandia is $0.75 per Islandia. In order to maintain the official value of the Islandia the Central Bank of South Island must either ________ domestic interest rates or supply Islandia, which causes the supply of international reserves to ________.

• A)raise; increase
• B)raise; decrease
• C)lower; decrease
• D)lower; increase

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Definitions:

Normal Line

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Print

The process of producing text, graphics, or images on paper or other printable material by physically marking them, typically using a printer connected to a computer or digital device.

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