If the Fed Announced It Would Fix the Exchange Rate

question 25

Multiple Choice

If the Fed announced it would fix the exchange rate at 100 yen per dollar, but with the current money supply the equilibrium exchange rate was 150 yen per dollar, then:

• A) arbitrageurs would sell yen in the marketplace.
• B) arbitrageurs would buy yen from the Fed.
• C) the money supply would fall until the market exchange rate was 100 yen per dollar.
• D) the money supply would rise until the market exchange rate was 100 yen per dollar.

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Definitions:

Lipids Absorption

The process by which lipids are taken up from the digestive tract into the bloodstream or lymphatic system for use or storage in the body.

Lymphatic System

Part of the immune system, comprising a network of lymphatic vessels that carry a clear fluid called lymph towards the heart.

Spleen

An organ involved in filtering blood, storing red blood cells, and playing a role in immunity as part of the lymphatic system.

Thyroid Gland

An endocrine gland located in the neck that produces hormones regulating growth, development, and metabolic rate.