Aruba Pegs Its Currency (The Aruban Florin) to the U

question 129

Multiple Choice

Aruba pegs its currency (the Aruban florin) to the U.S. dollar at a rate of Af 2 = $US1. Suppose that the actual exchange rate is equal to this pegged rate. Now suppose that the Aruban central bank buys dollars. Which of the following describes what will happen to Aruba's exchange rate?

• A) The exchange rate will appreciate.
• B) The exchange rate will depreciate.
• C) The exchange rate will not change.
• D) Not enough information is provided to answer.

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Definitions:

Reversibility

A mental operation in which a child realizes that one operation can be negated, or reversed, by the effects of another.

Reversibility

The cognitive ability to understand that actions can be reversed, returning to the original state.

Mental Operation

Cognitive processes that involve manipulating information mentally, such as reasoning, problem-solving, and decision-making.

Conservation-of-Volume Task

A cognitive development task used in developmental psychology to assess a child's understanding that the quantity of a substance remains unchanged even when its appearance changes.