Under a fixed exchange rate system, the central bank of a country experiencing a balance of payments surplus will:
A) increase the supply of domestic currency to prevent currency depreciation.
B) increase the demand for domestic currency to prevent currency depreciation.
C) increase the supply of domestic currency to prevent a currency appreciation.
D) increase the demand for domestic currency to prevent a currency appreciation.
C
You might also like to view...
Money as a medium of exchange
I. Facilitates the exchange of goods II. Reduces the incentive to barter A) I only B) II only C) Both I and II D) Neither I nor II
Which of the following statements is true?
A. Currencies whose prices are fixed to the same commodity would have currency exchange rates that are also fixed. B. The special drawing right (SDR) is a basket of currencies made up of U.S. dollars, euros, and Japanese yen. C. Today, South Africa is a country that has a currency fixed to gold. D. A country maintains a cleanly floating exchange rate value to neutralize the international value of its currency.