If a Country Finds Its Fixed Rate Currency Falling

question 252

Multiple Choice

If a country finds its fixed rate currency falling:

• A)it can use foreign exchange reserves to purchase some of its currency.
• B)it can add to its foreign exchange reserves by selling some of its currency.
• C)it cannot use monetary policy to maintain its exchange rate.
• D)it will allow its currency devaluate.

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Definitions:

Cash Flow From Investments

Financial statement item that reports the net amount of money used for or generated from the company's investment purchases and sales during a specific period.

Acquisition

The process of acquiring control of another company by purchase or exchange of equity.

Capital Gain

The increase in value of an asset or investment from its purchase price to its selling price.

Net Investments

The total amount spent by a company or economy on capital assets, minus depreciation, indicating the addition to the overall productive capacity.