If a Country Fixes Its Exchange Rate Below the Equilibrium

question 55

Multiple Choice

If a country fixes its exchange rate below the equilibrium value,

• A) the central bank must buy its own
• B) there will be downward pressure on the exchange rate
• C) its currency will appreciate
• D) the result is an excess demand for that country's currency
• E) its currency will depreciate

---

Definitions:

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay, representing the benefit to consumers.

Natural Monopoly

A market condition where due to high fixed costs or unique resources, a single firm can supply a good or service to an entire market at a lower cost than what two or more firms could.

Monopolist

A single seller in a market, who has significant market power and can influence the price of goods or services.

Profits

The financial gain achieved when the revenue earned from business activities exceeds the expenses, costs, and taxes needed to sustain the activities.