In a Fixed-Rate System Central Banks Would NOT Maintain Currency

question 22

Multiple Choice

In a fixed-rate system central banks would NOT maintain currency values by

• A)increasing the money supplies of nations with overvalued currencies
• B)boosting the money supplies of nations with undervalued currencies
• C)buying up overvalued currencies in the foreign exchange market
• D)selling undervalued currencies in the foreign exchange market

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Definitions:

Price Discrimination

A pricing strategy where similar goods or services are sold at different prices to different groups of people.

Ethnic Group

A community or population made up of people who share a common cultural background, ancestry, or social experience.

Potential Competitors

Firms that are not currently in a market but have the capacity to enter if they choose.

Price-Elastic

Price-elastic refers to the responsiveness of the quantity demanded or supplied of a good to a change in its price; high elasticity means quantity changes significantly with price changes.