Under a Fixed Exchange Rate System,if an Appreciation in the Value

question 47

Multiple Choice

Under a fixed exchange rate system,if an appreciation in the value of a country's currency develops,the monetary authorities ________.

• A)will gain international reserves
• B)buy the domestic currency in foreign exchange markets
• C)sell foreign exchange in foreign exchange markets
• D)will lose international reserves

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Definitions:

Isostatic Rebound

The rise of land masses that were depressed by the huge weight of ice sheets during the last glacial period, through a process of gravitational equilibrium.

Ice

The solid state of water, occurring naturally at temperatures below 0 degrees Celsius, important for climate and ecological systems.

Terraces

Flat or stepped surfaces carved into landscapes by natural processes like erosion or by human activities in agriculture or building.

Superposition

A principle stating that in an undisturbed sequence of sedimentary layers, each layer is younger than the one below it and older than the one above it.