Under Fixed Exchange Rates, a Central Bank

question 107

Multiple Choice

Under fixed exchange rates, a central bank

• A)adjusts the money supply automatically and immediately to changes in the demand and supply of foreign exchange
• B)need hold no reserves of foreign exchange
• C)enforces the fixed exchange rate by refusing to buy or sell foreign exchange whenever changes occur in demand or supply
• D)may find its reserves fluctuating as demand and supply conditions change
• E)has no authority to buy or sell foreign exchange

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The price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.

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