An Arrangement by Which a Central Bank Holds Enough Foreign

question 128

Multiple Choice

An arrangement by which a central bank holds enough foreign currency to back each unit of the domestic currency is called a:

• A) floating exchange rate.
• B) dollarization.
• C) monetization.
• D) currency board.

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Definitions:

Negative Net Working Capital

A financial situation where a company's current liabilities exceed its current assets, indicating potential liquidity problems.

Current Liabilities

Short-term financial obligations that are due within one year or within the normal operating cycle of a business, whichever is longer.

Current Assets

Financial resources or inventory that are readily convertible into cash or are expected to be used up through the normal operations of the business within one year or one cycle of operation.

Generally Accepted Accounting Principles

The standard framework of guidelines for financial accounting used in any given jurisdiction; commonly known as GAAP.