If a Government Wishes to Limit or Prohibit Fluctuations in Exchange

question 27

Multiple Choice

If a government wishes to limit or prohibit fluctuations in exchange rates, it will choose:

• A) to fix, or peg, the value of its currency to some base currency over a sustained period.
• B) to allow its currency to rise or fall in price, depending on a variety of supply and demand factors.
• C) to suspend purchases and sales of its currency.
• D) to allow the rate to be set by international banks.

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Definitions:

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Devices that convert sunlight directly into electricity, widely used for renewable energy generation.

Imported

Pertains to goods or services brought into a country from abroad for sale or use.

EU

The European Union (EU) is a political and economic union of 27 member states that are located primarily in Europe, aimed at facilitating free trade, freedom of movement, and common legislation.

NAFTA

The North American Free Trade Agreement, an agreement among the United States, Canada, and Mexico designed to remove tariff barriers between the three countries.