The Central Bank of Country X Buys and Sells Its

question 12

Multiple Choice

The central bank of Country X buys and sells its own currency to ensure that the currency is always exchanged in a ratio of 2:1 with the currency of Country Y. What can we conclude about these two currencies?

• A) Country X is using the Euro.
• B) Country X has pegged its currency to the currency of Country Y.
• C) Country X has an undesirable currency.
• D) Country X allows its currency to float relative to the currency of Country Y.

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Definitions:

P(A|B)

The chance that event A will occur, assuming event B has occurred, indicative of a conditional probability.

P(B)

The probability of occurrence of event B in a statistical experiment.

P(A And B)

The likelihood that events A and B will happen simultaneously.

Independent Events

Two or more events are independent if the occurrence of one does not affect the probability of the other(s).