If a Country Sets a Pegged Exchange Rate That Is

question 159

Multiple Choice

If a country sets a pegged exchange rate that is above the equilibrium exchange rate,how can the country maintain the peg?

• A)by purchasing surplus domestic currency at the pegged rate
• B)by selling surplus domestic currency at the pegged rate
• C)by purchasing surplus domestic currency at the equilibrium exchange rate
• D)by increasing the pegged exchange rate

---

Definitions:

Long-Run Equilibrium

A state in which all firms in a market are earning normal profits, and there is no incentive for firms to enter or exit the market.

Marginal Cost

Marginal cost is the additional cost incurred by producing one additional unit of a good or service.

Celebrity Spokesperson

A famous individual who is paid to use their fame to help promote a product or service.

Monopolistic Competitors

Companies that have many competitors but try to differentiate their products from others to gain a competitive edge.