Exhibit 19-7 -Imagine There Are Only Two Countries in the World, Mexico

question 46

Multiple Choice

Exhibit 19-7
-Imagine there are only two countries in the world, Mexico and Canada, and two currencies, pesos and Canadian dollars. If Mexico's central bank wants to protect its currency from depreciating in response to the demand shift shown in Exhibit 19-7, which of the following is most likely to be the policy it will choose?

• A)increasing the supply of pesos
• B)decreasing the supply of Canadian dollars
• C)purchasing Canadian dollars with newly issued pesos
• D)purchasing pesos with reserves of Canadian dollars
• E)selling pesos to Canadians

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Definitions:

Great Depression

A severe worldwide economic downturn that lasted from the late 1920s through the 1930s, leading to mass unemployment and poverty.

World War II

A global conflict that lasted from 1939 to 1945, involving most of the world's nations, including all of the great powers, eventually forming two opposing military alliances: the Allies and the Axis.

Fundamental Alteration

A significant change that fundamentally modifies the nature of something, often used in legal and policy contexts to describe changes that affect the essence of a policy, practice, or procedure.

Mass Immigration

The large-scale movement of people from one country to reside in another country, often causing significant demographic and social impacts.