Suppose a Central Bank Tries to Keep Exchange Rates Fixed

question 59

Multiple Choice

Suppose a central bank tries to keep exchange rates fixed. When there is an increase in the demand for foreign goods, the central bank will most likely

• A) buy foreign currency in exchange for the domestic currency.
• B) do nothing.
• C) sell the domestic currency in exchange for foreign reserves.
• D) use foreign reserves to buy the domestic currency.

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Definitions:

Beta-Adrenergic Agents

Medications that stimulate beta-adrenergic receptors in the heart, lungs, and other parts of the body to treat conditions like asthma, heart failure, and hypertension.

Diuretics

Medications used to help the body eliminate excess salt and water through urine, commonly prescribed for managing high blood pressure and edema.

Anticoagulants

Medications or substances that prevent blood clotting, thereby reducing the risk of heart attacks, strokes, and blood clots in veins and arteries.

Cardiac Contractile Strength

The capability of the heart muscle to contract, which affects the heart's ability to pump blood effectively.