To Offset an Increased Demand for Its Currency, a Government

question 39

Multiple Choice

To offset an increased demand for its currency, a government fixing its exchange rate

• A)must sell gold or some other precious metal.
• B)must increase the supply of the foreign currency.
• C)must increase the supply of its currency.
• D)must make it illegal to sell its currency.

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Definitions:

Rate of Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment's initial cost, indicating profitability.

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return.

Discount Factor

A multiplier used in time value of money calculations to determine the present value of future cash flows.

Electrocardiogram

A test or record of the electrical activity of the heart over a period of time.