In a Noncooperative Environment of Pegged Exchange Rates, If the Home

question 172

Multiple Choice

In a noncooperative environment of pegged exchange rates, if the home nation is experiencing high inflation due to excessive demand, it may choose to ______, which would cause______.

• A) forgo the pegged exchange rate; extreme depreciation
• B) devalue its currency; the foreign nation to suffer deficient demand for its products
• C) cut the monetary growth rate; a rise in interest rates
• D) revalue its currency; the foreign nation to suffer excessive demand for its products

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Definitions:

Impairment

The condition where an asset's market value drops below its recorded cost, necessitating an adjustment to reflect the decreased value on financial statements.

Goodwill Impairment

A decrease in the value of a company's goodwill, indicating that the value of acquired assets has fallen below their original cost.

Income Tax Reassessment

The process by which tax authorities review and possibly adjust the amount of income tax payable by an individual or corporation following the submission of tax returns.

Capital Asset

Long-term property or investment that is not easily sold or exchanged for cash without a substantial loss in value.