If a country wants to keep a foreign currency overvalued against the domestic currency:
A) it will buy both the foreign and domestic currency.
B) it will sell both the foreign and domestic currency.
C) it will buy the domestic currency and sell the foreign currency.
D) it will buy the foreign currency and sell the domestic currency.
D
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Answer the following questions true (T) or false (F)
1. Autarky is a situation where one country does not trade with other countries. 2. The ratio at which a country can trade its exports for imports from other countries is called comparative advantage. 3. A tariff is a numerical limit on the quantity of a good that can be imported.
What does the classical model predict will happen when an increase in aggregate demand causes the overall price level to rise?
a. Sticky upward prices will allow producers to quickly boost their output. b. Input suppliers will compete against each to quickly drive down input prices. c. A prolonged inflationary gap will occur at the higher price level. d. Input suppliers will bid up input prices to quickly adjust to the higher price level.