If a Country Pegs Its Currency to a Foreign Currency

question 79

Multiple Choice

If a country pegs its currency to a foreign currency, it no longer has the ability to use monetary policy to stabilize the economy because:

• A)it no longer has a central bank.
• B)monetary policy must be used to keep the exchange rate's market equilibrium value at its official value.
• C)banks will begin to hold 100% of their deposits in reserves.
• D)it must eliminate its currency from circulation and replace it with the foreign currency.

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Definitions:

Behaviorists

Psychologists who focus on observable behaviors and the ways in which learning mechanisms affect behavior.

Unconditioned Response

An automatic, natural reaction to a stimulus that occurs without any need for prior learning.

Salivating

The secretion of saliva, often triggered by the anticipation of food, as part of the body's digestion process.

Conditioned Anxiety

Anxiety learned through classical conditioning, where a neutral stimulus becomes associated with an anxiety-provoking event.