Paul Krugman Has Analyzed Fixed Currency Pegs and the Likely

question 16

Multiple Choice

Paul Krugman has analyzed fixed currency pegs and the likely cause for them to break. His model is one in which the central bank is under political control, which results in:

• A) fiscal dominance by the elected government whereby the central bank must print money to fund government deficits.
• B) authority of the central bank to set rules for proper monetary management.
• C) the establishment of a currency board to manage the pegged exchange rate.
• D) the ability to control the money supply and interest rates to maintain the peg.

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Definitions:

Brain Changes

Alterations in the structure, function, or chemistry of the brain resulting from growth, learning, aging, or exposure to various experiences.

Pituitary

A small, pea-sized gland located at the base of the brain that produces hormones influencing various bodily functions, including growth and reproduction.

Adrenals

Glands located above the kidneys that produce hormones such as adrenaline and cortisol, which regulate stress response and other vital functions.