If a Country Sets a Pegged Exchange Rate That Is

question 192

Multiple Choice

If a country sets a pegged exchange rate that is below the equilibrium exchange rate,how can the country maintain the peg?

• A)by purchasing surplus domestic currency at the pegged rate
• B)by selling surplus domestic currency at the pegged rate
• C)by purchasing surplus domestic currency at the equilibrium exchange rate
• D)by decreasing the pegged exchange rate

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Definitions:

Cash Flow Stream

A cash flow stream is a series of cash inflows and outflows over a period of time, typically used in financial analysis to determine the value or profitability of an investment.

Rate of Return

The gain or loss of an investment over a specified period, expressed as a percentage of the investment’s cost.

Annuity

A financial product that pays out a fixed stream of payments to an individual, typically used as an income stream for retirees.

Present Value

The contemporary value of a forthcoming sum of money or cash flow series, adjusted for a specific rate of return.