If a Country Has a Fixed Exchange Rate

question 156

Multiple Choice

If a country has a fixed exchange rate

• A)the equilibrium exchange rate in that market does not respond to changes in supply and demand for currency.
• B)central banks have more control over real GDP in the economy.
• C)central banks must buy and sell their holdings of currencies to maintain a given exchange rate.
• D)the exchange rate is allowed to fluctuate in response to changes in the supply and demand for currency.

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Definitions:

Incentive Approaches

Theories of motivation in which behavior is explained as a response to the external stimulus and its rewarding properties.

Internal Stimuli

Signals originating from within the body that influence feelings, thoughts, or behaviors, such as hunger, pain, or internal emotional states.

Innate Patterns

Fixed sequences of behavior or instincts present in animals from birth, not learned from experience, and manifest under certain conditions to ensure survival.

Biologically Determined

Characteristics or behaviors that are influenced by genetic makeup or inherent in the biology of an organism.