A Country with a Fixed Exchange Rate Policy That Is

question 48

Multiple Choice

A country with a fixed exchange rate policy that is experiencing an economic slowdown will find:

• A)Their central bank will reduce the domestic interest rate in order to fend off the slowdown
• B)Their currency will depreciate to stimulate exports
• C)Their bonds will become less attractive to foreign investors
• D)The stabilization mechanism that policy makers could have used is completely shut down

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Definitions:

Sharp Increase

A rapid and significant rise in a particular metric, such as price, volume, or value.

Structural Unemployment

A form of unemployment caused by shifts in the economy or changes in technology that create a mismatch between the skills of the workforce and the needs of employers.

Necessary Skills

The essential abilities and expertise required for effective performance in a specific job or activity.

Longer in Demand

Products or services that experience sustained interest and need from consumers over an extended period.