Asked by
Marleen Lopez
on Dec 19, 2024
Verified
A declining amount of foreign-exchange reserves resulting from maintaining a pegged exchange rate would have which of the following effects?
A) a decrease in domestic money supply
B) a negative item entry in the balance of payments statement
C) rising inflationary pressure
D) an increase in the supply of local currency coming from this nation's central bank
Foreign-exchange Reserves
Assets held by a central bank in foreign currencies, which are used to back liabilities on their own issued currency as well as to influence monetary policy.
Pegged Exchange Rate
A currency system where a country's currency value is fixed or linked to another currency or a basket of currencies.
- Ascertain the tools and procedures used to preserve fixed foreign exchange values.
- Discuss the implications of trade deficits and how they are financed.
Verified Answer
BR
Learning Objectives
- Ascertain the tools and procedures used to preserve fixed foreign exchange values.
- Discuss the implications of trade deficits and how they are financed.
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