Under a Currency Board,a Nation's Central Bank

question 8

Multiple Choice

Under a currency board,a nation's central bank

• A) raises or lowers interest rates to keep the exchange rate fixed
• B) consults with the central banks of other nations to agree upon monetary policy
• C) operates according to a strict policy rule regarding money supply growth
• D) uses exchange rates as an intermediate policy target and the inter-bank lending rate as an ultimate target
• E) serves as the lender of last resort for the banking system

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Definitions:

Economic Profit

The excess of total revenue over total costs, including both explicit and opportunity costs.

Price

The sum of money needed to buy a product or service.

Short-Run Supply Curve

A graphical representation showing the quantity of a good that producers are willing and able to sell at different prices over a short period.

Marginal Cost Curve

A graph showing the change in the cost of producing one more unit of a good as production levels change.