Assume That the Foreign Exchange Market Is Trading the Domestic

question 318

Multiple Choice

Assume that the foreign exchange market is trading the domestic currency at a rate (Canadian dollars per unit of the domestic currency) above the rate fixed by the government.To maintain the fixed exchange rate,the government must:

• A) decrease foreign exchange reserves.
• B) lower the domestic interest rate.
• C) facilitate the domestic purchase of foreign financial assets.
• D) raise the domestic interest rate.

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Definitions:

Minimum Return on Investment

The lowest acceptable return on an investment, below which investments are considered unprofitable or not worth pursuing.

Profit Margin

A financial metric used to evaluate a company's financial health by revealing the percentage of revenue that exceeds the costs involved in making sales.

Return on Investment

A measure used to evaluate the efficiency or profitability of an investment, calculated as the net profit from the investment divided by its cost.

Residual Income

The amount of income that an individual has after all personal debts and expenses have been paid.