Which of the Following Statements Regarding Exchange Rate Intervention Is

question 127

Multiple Choice

Which of the following statements regarding exchange rate intervention is FALSE?

• A)A devaluation can be used to increase exports and reduce imports.
• B)A devaluation can be used to eliminate a recessionary gap.
• C)A revaluation can be used to eliminate a recessionary gap.
• D)Devaluations and revaluations can be used to eliminate shortages or surpluses in the foreign exchange market.

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Definitions:

Risk Premium

The excess return that an investment is expected to yield over a risk-free rate as compensation for its higher risk.

Canadian Common Stocks

Shares representing ownership in Canadian companies, traded on stock exchanges and entitling holders to voting rights and dividends.

Arithmetic Return

The simple average of a series of returns generated over a period of time, providing a basic measure of investment performance.

Investment

The allocation of resources, typically money, with the expectation of generating an income or profit.