When Output Falls or the Foreign Rate of Interest Rises

question 108

Multiple Choice

When output falls or the foreign rate of interest rises, what must the central bank do and why?

• A) It must sell foreign currency reserves for its own currency to raise rates of interest and decrease the supply of money.
• B) It must buy foreign currency reserves with its own currency to lower rates of interest and increase the supply of money.
• C) It must resist the temptation to do something immediately and let the situation work itself out.
• D) It must ask the domestic government to issue more bonds to raise domestic rates of interest.

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Definitions:

Hemispheric Dominance

A process in which one hemisphere becomes stronger and more adept than the other.

Synaptogenesis

The process by which neurons form synapses with other neurons, enabling the transmission of signals in the nervous system.

Myelination

The formation of a fatty sheath around the axons of neurons, which improves the speed and efficiency of electrical impulses in the nervous system.

Synaptic Pruning

The process by which extra neurons and synaptic connections are eliminated to increase the efficiency of neurotransmission in the brain.