With Pegged Exchange Rates, in the Case of Fiscal Dominance

question 22

Multiple Choice

With pegged exchange rates, in the case of fiscal dominance, if investors are unaware of pending problems as the central bank continuously monetizes government bonds, then at some point:

• A) the IMF will step in and take over management of the currency.
• B) the nation will reverse course and begin accumulating foreign currency reserves.
• C) reserves will run out, the money supply and inflation will rise, and after that point the fixed exchange rate cannot be sustained.
• D) the government will be forced to give up control of the central bank.

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Definitions:

DSM-5 Criteria

The diagnostic guidelines and criteria set forth in the fifth edition of the Diagnostic and Statistical Manual of Mental Disorders for identifying mental health disorders.

Bulimia Nervosa

An eating disorder marked by binge eating followed by methods to prevent weight gain such as vomiting, fasting, or excessive exercise.

Chronic Dieters

Individuals who repeatedly engage in dieting efforts, often in an unhealthy and continuous cycle of weight loss and gain.

Eating Disorder

A mental disorder characterized by abnormal eating habits that negatively affect a person's physical or mental health.