The Demand for the Franconian Franc in the Foreign Exchange

question 131

Multiple Choice

The demand for the Franconian franc in the foreign exchange market equals 14,000 - 3,000e and the supply of francs in the foreign exchange market equals 2,000 + 2,000e, where e is the nominal exchange rate expressed in U.S. dollars per franc. If the franc is fixed at 2 U.S. dollars per franc, then to maintain this fixed rate Franconia's international reserves must:

• A)decrease by 2,000 francs per period.
• B)increase by 4,000 francs per period.
• C)decrease by 4,000 francs per period.
• D)increase by 2,000 francs per period.

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Definitions:

Centre-surround

A principle often used in neurophysiology and vision science, describing how certain neurons in the visual system have receptive fields with a center region that responds one way (e.g., to light) and a surround region that responds in the opposite way.

Receptive Field

The specific physical area within the sensory space (such as visual or auditory) that can elicit a response from a sensory neuron when stimulated.

Visual Cell

A type of cell in the retina that responds to light, aiding in the process of vision.

Opponent Process Theory

A psychological and neurological model that explains how the perception of colors results from opposing responses between two sets of color receptors in the eyes.