What Must a Nation's Central Bank Do to Maintain a Fixed

question 46

Multiple Choice

What must a nation's central bank do to maintain a fixed exchange rate?

• A) achieve a balanced budget
• B) keep the level of foreign reserves above zero so that it can prevent a fall in value of its currency
• C) keep the level of foreign reserves at zero
• D) hold only foreign government bonds to back the currency 100%

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Definitions:

Social Control

Mechanisms, strategies, and institutions society uses to regulate individual and group behavior to conform to societal norms and rules.

Minority Influence

Describes a situation where a smaller group within a larger society can influence the majority to accept their beliefs or behaviors.

Peripheral Route Persuasion

A method of persuasion that relies on superficial cues to promote acceptance of an argument, rather than logical reasoning.

Central Route Persuasion

A method of persuasion that involves deeply processing the content of a message, considering logical and factual arguments.