If the Currency Substitution Approach Is True,then a Change to Domestic

question 48

Multiple Choice

If the currency substitution approach is true,then a change to domestic money supply that causes currency depreciation could mean:

• A) Further depreciation as individuals switch the substitute currency.
• B) Central banks must intervene to maintain the fixed exchange rate of substitute currencies.
• C) The decline in money supply will offset any depreciation.
• D) The increase in money supply will cause further depreciation.

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Definitions:

Equity Method

An accounting technique used to record investments in other companies where the investor has significant influence but does not have majority control.

Statement of Comprehensive Income

A financial statement that shows all changes in equity during a period except those resulting from investments by and distributions to equity investors.

Voting Shares

Shares that grant the holder the right to vote on company matters, such as electing the board of directors or making decisions affecting the company's policies.

Shareholders' Equity

The residual interest in the assets of an entity after deducting liabilities, essentially representing the owners' equity in a corporation.