Why Might a Nation Seek to Maintain a Pegged Exchange

question 57

Multiple Choice

Why might a nation seek to maintain a pegged exchange rate?

• A) It makes business planning easier for firms involved in the global economy.
• B) It removes the need to intervene in the foreign exchange market.
• C) It ensures that the exchange rate will remain at its equilibrium.
• D) It makes their currency more attractive on the foreign exchange market.

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Definitions:

Spacing Effect

The cognitive phenomenon whereby learning is facilitated when study sessions are spaced out over time rather than conducted in close succession.

Misinformation Effect

A phenomenon where a person's memory of an event can be influenced by misleading information introduced after the event, leading to false or distorted recollections.

Proactive Interference

The difficulty in learning new information because of the presence of previous information.

Sensory Memory

The shortest-term element of memory, which acts as a buffer for stimuli received through the senses, lasting typically up to several seconds.