What Is the Long-Term Result of a Central Bank Fixing

question 109

Multiple Choice

What is the long-term result of a central bank fixing an exchange rate below the equilibrium market rate?

• A)The money supply will have to decrease resulting in inflation.
• B)The money supply will have to decrease resulting in deflation.
• C)The money supply will have to increase resulting in inflation.
• D)The money supply will have to increase resulting in deflation.
• E)The money supply will decrease but the price level will be unaffected.

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Definitions:

FUTA Tax Return

A federal tax form required from employers to report and pay unemployment taxes to the Internal Revenue Service, associated with the Federal Unemployment Tax Act.

Wage And Tax Statement

A form, typically referred to as a W-2 form in the United States, that employers provide to employees detailing the employee's annual wages and the amount of taxes withheld from their paycheck.

Tax Liability Accounts

Financial accounts that track the amount of tax that a person or organization owes to the government.

General Checking Account

A type of bank account that allows for the deposit and withdrawal of funds for daily transactions.