Currency devaluations hurt consumers because they make imports ________ expensive in the _____________ currency

If the prices of all goods increase by the same proportion as income, the quantity demanded of good x will:

a. decrease. b. increase. c. remain unchanged. d. change in a way that cannot be determined from the information given.

To counteract the depreciation of the national currency against the U.S. dollar, the central bank of a country can intervene in the foreign exchange market. Which of the following imposes a restriction on this ability of the central banks to maintain a fixed exchange rate?

a. The central banks have a limited amount of international reserve. b. The central banks have a limited amount of domestic currency. c. Unrestricted sale of foreign currency will cause inflation in the domestic economy. d. The supply of dollars is perfectly elastic in the foreign exchange market. e. The central banks need to maintain a certain amount of its assets in the form of gold.