If a Country Has a Fixed Exchange Rate

question 90

Multiple Choice

If a country has a fixed exchange rate,

• A)the equilibrium exchange rate in that market does not respond to changes in supply and demand for currency.
• B)central banks have more control over real GDP in the economy.
• C)central banks must buy and sell their holdings of currencies to maintain a given exchange rate.
• D)the exchange rate is allowed to fluctuate in response to changes in the supply and demand for currency.
• E)the central bank sets a fixed amount of domestic currency that may be exchanged.

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Definitions:

Cost Of Goods Sold

The direct costs attributable to the production of the goods sold in a company, including materials and labor.

Dividends Paid

The part of a company's profits paid out to shareholders, typically as cash or shares.

Interest Expense

The cost incurred by an entity for borrowed funds; it is the price paid for the use of borrowed money, or, for corporations, the price paid for the use of borrowed capital.

Payout Ratio

A financial metric that measures the proportion of earnings a company pays to its shareholders in the form of dividends.