When Faced with a Continual Excess Demand for Foreign Exchange

question 26

Multiple Choice

When faced with a continual excess demand for foreign exchange, which of the following options can the government choose to eliminate the disequilibrium situation?

• A)increase the peg or devalue
• B)engage in fiscal policy and raise the country's income level
• C)engage in monetary policy and lower interest rates
• D)increase the inflation rate
• E)decrease the peg or revalue

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Definitions:

Sponge

An object or organism able to absorb liquid quickly; metaphorically, a person who absorbs information readily.

Rock

A naturally occurring solid aggregate of minerals or mineral-like substances.

Decentered Thinking

Refers to the ability to consider multiple aspects of a situation simultaneously, characteristic of more advanced stages of cognitive development.

False Belief Tasks

Experimental tasks used to assess a child’s understanding that other people can hold beliefs that are different from reality, a key part of theory of mind development.